Paper 5 - Corporate & MGMT Acs MCQs Part 1 PDF

CS EXECUTIVE –
MANAGEMENT ACCOUNTING
INDEX
Sr. No PARTICULARS PAGE
MANAGEMENT ACCOUNTING
1. COST SHEET 1–9
2. BUDGETARY CONTROL 10 – 23
3. MARGINAL COSTING 24 – 39
4. RATIO ANALYSIS 40 – 51
5. VALUE OF SHARES / GOODWILL 52 – 59

J. K. SHAH CLASSES CS EXECUTIVE – MANAGEMENT ACCOUNTING
CHAPTER 1 COST SHEET
THEORY MCQs
Q.1. A Statement which shows break-up and buildup of cost

(a) Costing (b) Cost sheet (c) Unit costing (d) Job costing
Q. 2. Sum total of direct cost is called as

(a) Product cost (b) Prime cost (c) Factory cost (d) Starting cost
Q. 3. Following are the uses of

(i) Determination of selling Price
(ii) Ascertain of Profit
(iii) Preparation of Budget
(iv) Inter firm & Intra firm cost comparison
(a) Balance Sheet (b) Paper Sheet
(c) Worksheet (d) Cost Sheet
Q. 4. Expenses incurred in the factory for the factory and upto factory gate
(a) Factory cost (b) Prime Cost
(c) Factory overheads (d) General overheads
Q. 5. Sum total of prime cost and factory overheads

(a) Production cost (b) Work cost
(c) Cost of contract (d) Factory on cost
Q. 6. Sum total of factory cost and office and administrative overheads

(a) Factory cost (b) Work cost
(c) Cost of production (d) Cost of sale
Q. 7. Sum total of cost of goods sold and selling & Distribution overheads
(a) Work cost (b) Cost of production
(c) Cost of sales (d) Prime cost
Q.8. Cost - Loss = ?

(a) Cost of sale (b) Total sales (c) Sales (d) Actual cost
Q9. An account giving details of cost of production, cost of sales and profit made during the particulars
period is called as
(a) Sales A/c (b) Cost A/c
(c) Production A/c (d) Profit & Loss A/c
Q10. Closing stock of Raw material is valued at

(a) Minimum cost (b) Cost of purchase (c) Average cost (d) Maximum cost
Q11. Valuation of WIP includes Direct Material, Direct Labour, Direct Expenses and
(a) Selling Overheads (b) Buying Cost
(c) Admin cost (d) Factory Overheads
:1:
Q12. In cost sheet we record only incomes i.e. sale of goods and sale of
(a) Services (b) Scrap (c) Assets (d) Shares
Q13. Which of the following costs is part of the prime cost of a manufacturing company?
(a) Cost of transporting raw materials from the supplier's premises
(b) Wages of factory workers engaged in machine maintenance
(c) Depreciation of Lorries used for deliveries to customers
(d) Cost of indirect production materials
Q.14. The term "prime cost" refers to

(a) All manufacturing costs incurred to produce units of output
(b) All manufacturing costs other then direct labour and raw material costs
(c) Raw material purchased and direct labour costs
(d) The raw material used and direct labour costs
Q15. Prime cost is

(a) All costs incurred in manufacturing a product
(b) The total of direct costs
(c) The material cost of a product
(d) The cost of operating a department
Q16. Which of the following is not a component of prime cost?

(a) Direct materials (b) Direct labour
(c) Direct expenses (d) Overhead
Q17. Overheads consist of all the following except

(a) Indirect materials (b) Factory utilities
(c) Direct labour (d) Indirect labour
Q18. Recruitment costs

(a) Shall form part of Prime Cost (c) shall form part of Overheads
(b) Shall from part of works out (d) shall be ignored
Q19. Cost of goods manufactured will include opening and closing stock for
(a) Raw materials and work in progress only
(b) Work in progress only
(c) Raw materials only
(d) Raw materials, work in progress, and finished goods
Q20. In the Cost Sheet, Income from sale of empty containers used for dispatch of the goods produced
shall be
(a) added to cost of production (b) deducted from cost of production
(c) added to sales (d) ignored
Q21. In the cost sheet, abnormal costs e.g. due to accident shall be
a. Added to cost of production b. deducted from sates
c. Deducted from cost of production d. Ignored
Q22. Direct materials + Direct labour + Direct expenses =

(a) Works costs (b) Cost of production (c) Cost of sates (d) Prime cost
:2:
Q23. Prime cost + Factory Overhead =_______
(a) Fixed Cost (b) Works Cost
(c) Cost of production (d) Cost of goods sold
Q24. Prime cost + Factory overhead + Administration overhead

(a) Works cost (b) Cost of production
(c) Prime cost (d) Cost of sales
Q25. Total cost - Selling and distribution overheads =

(a) Cost of goods sold (b) Closing stock
(c) Cost of production (d) Net profit
Q26. Cost of production - Administration overheads =__

(a) Prime cost (b) Cost of sales
(c) Works cost (d) Work in progress
Q27. Prime cost + Overheads =______

(a) Works cost (b) Prime cost
(c) Cost of sales (d) Cost of production
Q28. Total cost + Profit = ____

(a) Selling price (b) Cost of goods sold
(c) Selling and distribution overheads (d) Gross Profit
Q29. The total variable cost _____ in total proportion to output

(a) Increase (b) Does not increase (c) Decrease (d) None of these
Q30. Variable cost per unit ________

(a) Remains constant (b) Varies (c) decreases (d) Increase
Q31. Fixed cost _____ in the same proportion in which output changes
(a) Does not change (b) changes (c) Increases (d) none of these
Q32. Fixe cost per unit _________with increase in output

(a) Decreases (b) Increases (c) changes (d) sometimes
Q33. Administration expenses are mostly____________

a. semi-variable b. variable c. fixed d. none of these
Q34. Cost of production is equal to___________

a. Works cost plus Administration Overheads
b. Prime cost plus Works cost
c. prime cost plus works overhead
d. works overhead plus administration overheads
Q35. Variable cost increases with _____________ in output

a. Increase b. Decrease c. increase or decrease d. none of these
Q36. Fixed cost per unit ______with rise in output and _________with fall in output
a. Decreases, increases b. Increases, decreases
c. Is constant remains same d. None of the above
:3:
Q37. The total of all direct expenses is known as ______ cost
a. Prime b. Works c. Production d. Both a & b
Q38. Works cost is a total of ___________________

a. Indirect material, Indirect labour
b. Direct material, direct labour, director chargeable expenses and works expenses
c. Direct material, direct labour
d. indirect material, Indirect labour, Indirect expenses
Q39. Depreciation is _____ expenditure

a. fixed b. Variable c. Adjustable d. Semi-variable
Q40. Expenses are excluded from cost

(a) Normal (b) abnormal (c) both a & b (d) none of these
Q41. Such expenses which are included even though they are not incurred for taking managerial
decisions are called
a. Notional expenses b. Actual expenses
c. Imputed d. None of these
Q42. _________ Expenses are partly fixed and partly variable

a. All expenses b. Variable c. Fixed d. Semi-variable
Q43. Unsuccessful research expenditure should be _____ cost accounts

a. Excluded from b. Included in
c. apportioned in d. None of these
Q44. Salary paid to general manager is an item of _____ expenses.

a. Fixed b. Variable
c. semi-variable d. Estimated
Q.45. Fancy packing is an example of ______ expenses

a. Selling b. Distribution
c. administration d. Factory
Q.46. Telephone expense is ______ expense

a. Variable b. Semi-variable
c. Fixed d. None of these
Q47. Primary packing is an item of ________

a. Selling overheads b. Prime cost
c. distribution overheads d. Factory overheads
Q48. Credit and collection cost is an item of

a. Selling overhead b. Office overhead
c. prime cost d. administrative overhead
Q49. Warehousing cost is an item of

a. Office overhead b. Distribution overhead
c. material cost d. Works overhead
:4:
Q50. Maintenance charges are in the nature of ______ expenses
a. Fixed b. Variable
c. Semi-variable d. None of these
Q51. Fixed cost per unit decreases when:

a. Production volume increases c. Variable cost per unit decreases.
b. Production volume decreases d. Variable cost per unit increases
Q52. Prime cost + Factory overhead cost is

a. Conversion cost b. Production cost
c. Total cost d. None of given option.
Q53. Factory overheads includes,

a. All manufacturing costs.
b. All manufacturing costs except direct materials and direct labor.
c. Indirect materials but not indirect labor
d. Indirect labor but not indirect material.
Q54. Added cost of new product will be,

a. Materials and labor.
b. Materials, labor and factory overheads.
c. Materials, labor, factory and administration overheads
d. Materials, labor and administration overheads. .
Q55. Packing cost is a __________

a. Production cost b. Selling cost
c. Distribution cost d. None of these
Q56. Which of the following items is not included in preparation of a cost sheet?
a. Carriage inward b. Purchase returns
c. Sales commission d. Interest paid
Q57. Which of the following are direct expenses?

(i) The cost of special designs, drawing or layouts
(ii) The hire of tools or equipment for a particular job
(iii) Salesman's wages
(iv) Rent, rates and insurance of a factory
a. (i) and (ii) b. (ii) and (iii)
c. (i) and (iv) d. (iii) and (iv)
Q58. A company has to pay Rs. 10,000 per unit royalty to the designer of a product which it
manufactures and sells. The royalty charge would be classified as a
a. Direct expense b. Production overhead
c. Administrative overhead d. Selling overhead
Q.59. Wherever part of the manufacturing operation is subcontracted, the subcontract charges related
to materials shall be
a. Ignored c. treated as works overheads
b. treated as cost materials d. treated as direct expenses
:5:
Q.60. Research and development cost relating to an existing product
a. shall be treated as Capital Expenditure
b. shall be treated as deferred revenue expenditure
c. shall be treated as Direct Expenses
d. shall be ignored
ANSWERS
1 B 2 B 3 D 4 A 5 B
6 C 7 C 8 C 9 C 10 B
11 D 12 B 13 A 14 D 15 B
16 D 17 C 18 C 19 A 20 B
21 D 22 D 23 B 24 B 25 A
26 C 27 C 28 A 29 A 30 A
31 A 32 A 33 C 34 A 35 A
36 A 37 A 38 B 39 A 40 B
41 A 42 D 43 B 44 A 45 B
46 B 47 D 48 A 49 B 50 C
51 A 52 B 53 B 54 B 55 B
56 D 57 A 58 A 59 D 60 C
:6:
PRACTICAL MCQs
Q1. ABC company manufactures desks. The beginning balance of Raw Material Inventory was Rs.
4,500; raw material purchases of Rs.29,600 were made, during the month end, Rs.7700 of raw
material was on hand. Raw material used during the month was ?
(a) Rs.26,400 (b) Rs. 34,100 (c) Rs. 37,300 (d) Rs. 29,600
Q2. M company manufactures tables. If raw material used was 7,80,000 and Raw material Inventory at
the beginning and end of the period respectively was Rs.17,000 and Rs. 21,000, what was the
amount of raw material purchased ?
(a) Rs. 76,000 (b) Rs 1,18,000 (c) Rs. 7, 84,000 (d) Rs. 1,01,000
Q3. If opening balance of material is Rs. 60,000; closing balance is Rs. 45,000 and value of material
used is Rs.75,000; then the amount of material purchased would be ?
(a) Rs.60,000 (b) Rs.90,000 (c) Rs.30,000 (d) None of these
Q4. M & Co. used in a particular year Rs. 3,00,000 of direct materials. The year end direct material
inventory was Rs. 50,000 more than it was at the beginning of the year Calculate direct material
purchases,
(a) Rs.3,00,000 (b) Rs. 2,50,000 (c) Rs. 3,50,000 (d) Rs. 4,00,000
Q5. From the following particulars, calculate Direct material consumed

Opening stock of Raw material Rs. 7 90,000
Import of Raw material from U.S.A Rs. 1,10,000
Custom duty on above @ 12.5% of Invoice Value
Carriage Freight & Octroi duty Rs. 1,250
Closing stock of Raw material Rs. 7 20,000
(a) 2,06,250 (b) 2,05,250 (c) 1,95,000 (d) 2,00,000
Q6. From the following details calculate Prime Cost.

Material Consumed Rs.1,00,000, Productive Wages 50,000, Direct expenses at 50% of Material
Used & Direct wages.
(a) 3,25,000 (b) 3,50,0000 (c) 2,30,000 (d) 2,25,000
Q7. If Prime Cost is Rs.16,000; Factory Overheads are 25% of Prime Cost and Office Overheads are
75% of Factory Overheads then Cost of Production would be:
(a) Rs.3,000 (b) Rs.15,000 (c) Rs.23,000 (d) None of these
Q8. If Prime Cost is Rs.24,000; Cost of Production is Rs.30,000; Office Overheads are 50% of Factory
Overheads, then Factory Cost would be:
(a) Rs.3,000 (b) Rs.27,000 (c) Rs.26,000 (d) Rs.28,000
Q9. Raw materials consumed Rs. 80,000

Direct wages ?
Factory overheads 60% of direct wages
Office overheads 10% of factory cost
Cost of production Rs. 1,76,000
(a) Rs. 88,000 (b) Rs. 50,000 (c) Rs. 68,000 (d) Rs. 60,000
:7:
Q10. For product A of Shilpa Ltd., the prime cost is Rs.20 unit, factory overheads are 20% of prime cost
and administration overheads are 25% on works cost. If the company desires to earn a profit of
25% on selling price, the selling per unit of product A would be _____
(a) Rs.40 (b) Rs. 33 (c) Rs. 90 (d) Rs.30
Q11. Job ABC was unfinished at the end of the accounting period. The Factory cost assigned to the job is
Rs. 12,000 of which Rs. 3,000 is direct material. Factory overhead is allocated to job at 150% of
direct labour cost. What was the amount of direct labour charged to Job?
(a) Rs. 9,000 (b) Rs. 3,600 (c) Rs. 4,500 (d) Rs. 3,000
Q12.
Direct material used: Rs. 20,000 Factory overhead: Rs. 40,000
Beginning goods in process: Rs. 0 Ending goods in process: Rs. 12,000
Cost of goods manufactured: Rs. 65,000 What was the amount of direct labour ?
(a) 17,000 (b) 77,000 (c) 5,000 (d) 48,000
Q13. Calculate cost of sales from the following:

Net works cost: Rs. 2,00,000
Administration overheads: Rs. 1,00,000
Opening stock of WIP: Rs. 10,000
Closing stock of WIP: Rs. 20,000
Closing stock of finished goods: Rs. 30,000
There was no opening stock of finished goods.
Selling overheads: Rs. 10,000
(a) Rs. 2,70,000 (b) Rs. 2,80,000 (c) Rs. 3,00,000 (d) Rs. 3,20,000
Q14. T company manufactures computer stands. What is the opening stock of Finished Goods if Cost of
Goods Sold is Rs. 1,07,000; the ending balance of Finished goods Inventory is Rs.20,000; and Cost
of Goods Manufactured is Rs. 50,000 less than Cost of Goods Sold.
(a) Rs. 70,000 (b) Rs.77000 (c) Rs.57,000 (d) Rs.1,27,000
Q15. Calculate value of closing stock from the following:

Opening stock of finished goods (500 units): Rs. 2,000
Cost of production (10,000 units): Rs. 50,000
Closing stock (1,000 units): ?
(a) Rs. 4,000 (b) Rs. 4,500 (c) Rs. 5,000 (d) Rs. 6,000
Q16. If units produced during the month are 10,000 (out of which 2,000 units were unsold), cost of
production is Rs. 62,000 and selling expenses per unit are Rs.1.80; then Cost of Sales would be:
(a) Rs. 64,000 (b) Rs. 67,600 (c) Rs. 92,400 (d) None of these
Q17. Vinayaka Ltd. furnishes the following information for a period, pertaining to its product ‘T’
Cost of production (for 11,000 units) Rs. 44,000
Selling expenses (per unit) Rs.0.40
Sales (for 9,000 units) Rs.54, 000
Profit per unit of the product was ?
(a) Rs. 1.15 (b) Rs. 1.20 (c) Rs. 2.60 (d) Rs. 1.60
:8:
Q18. The cost per unit of a product manufactured in a factory amounts to Rs. 160 (75% variable) when
the production is 10,000 units. When production increases by 25%, the cost of production will be
…………….
(a) Rs. 145 (b) Rs. 150 (c) Rs. 152 (d) Rs. 140
Q19. The production cost to produce one unit of finished goods was Rs. 45. Direct materials were 1/3 of
the total cost, and direct labour was 40% of the combined total of direct labour and overheads.
The cost for direct materials, direct labour and overheads was:
(a) Rs. 15, Rs. 18, Rs. 12 respectively (b) Rs. 15, Rs. 12, Rs. 18 respectively
(c) Rs. 15, Rs. 16, Rs. 14 respectively (d) Rs. 15, Rs. 10, Rs. 20 respectively
Q20. A company calculates the prices of jobs by adding overheads to the prime cost and adding 30% to
total costs as a profit margin. Job number Y256 was sold for Rs. 1,690 and incurred overheads of
Rs. 694. What was the prime cost of the job?
(a) Rs. 489 (b) Rs. 606 (c) Rs. 996 (d) Rs. 1,300
Q21. A customer has ordered a batch of 600 binders. The following illustrate the cost for a typical batch
of 100 binders.
Particulars Rs.
Direct materials 60
Direct labour 20
Machine set up 6
Design and art work 30
Prime cost 116
Direct employees are paid on a piecework basis.
ABC Ltd. absorbs production overheads at a rate of 20% of direct wages cost. 5% is added to the
total production cost of each batch to allow for selling, distribution and administration overheads.
Required profit margin is 25% of sales value. The selling price for 600 binders will be:
(a) Rs. 756 (b) Rs. 772.8 (c) Rs. 806.4 (d) Rs. 1008

:9:
CHAPTER 2 BUDGETARY CONTROL
THEORY MCQs
1. The budget control organisation is usually headed by a top executive who is known as ………………
a) Budget controller b) Cash controller
c) Production controller d) None of the above
2. In order to prepare a flexible budget, items of anticipated expenditure are classified into …………….
a) Fixed, variable and semi variable b) Variable and fixed
c) Semi variable d) None of the above
3. ……… budget is a summary of all the functional budgets and the budgeted profit or loss
a) Master b) Cash c) Production d) None of the above
4. ……….. budget is most suited for fixed expenses

a) Fixed b) Variable c) Semi variable d) None of the above
5. …………budget shows he anticipated sources and utilization of cash.

a) Cash b) Cheque c) Both a and b d) None of the above
6. The two main methods of preparing cash budget are …….…… method and ….. method
a) Receipts and payments b) Net adjusted income
c) Profit and loss account d) Both a and b
7. Zero base budgeting was first used by ……………

a) Jimmy Carter b) Koontz and Donald
c) F. W. Taylor d) None of the above
8. Master budget incorporates all ……budgets

a) Functional b) Production c) Selling d) Distribution
9. A factor which influences all other budgets, is called …….factor

a) Key b) Master c) Cash budget d) None of the above
10. Budgetary control is a system of controlling ……..

a) Costs b) Finance c) Account d) Management
11. A budget that gives a summary of all the functional budgets and projected profit and loss account
is known as
a) Capital budget b) Sales budget c) Master budget d) Flexible budget
12. Which of the following is usually a long term budget?

a) Sales budget b) Cash budget
c) Capital expenditure budget d) Fixed budget
13. The fixed-variable cost classification has a special significance in the preparation of:
a) Flexible budget b) Master budget
c) Cash budget d) Capital expenditure budget
: 10 :
14. The success of a flexible budget depends upon careful study and classification of expenses into
a) Historical and predetermined b) Manufacturing, administrative and selling
c) Fixed, variable and semi-variable d) None of the above
15. The budget that is set first and all the other budgets are subordinate to it, is :
a) Cash budget b) Master budget
c) Capital expenditure budget d) Budget for the key factor
16. Cash budget is prepared because it :

a) Is legally compulsory b) Indicates profitability
c) Encourages over spending d) Helps in cash management
17. If period of credit allowed to the customer is 2 months then the credit sales of which month will
be considered for cash budget :
a) First month b) Second month
c) Third month d) Fourth month
18. While preparing cash budget, cash discount allowed to customers is added to :
a) Payments b) Receipts c) Sales d) Purchases
19. While preparing cash budget, operating balance of cash is added to :

a) Receipts b) payments c) Profits d) Loss
20. Cash budget is based on …….

a) Past performance b) Future performance
c) Average of past performance d) None of these
21. Budgeting may be said to be the act of ….. budgets

a) Building b) Making c) Manual d) None of the above
22. Budgeting system _______key managerial functions

a) Integrates b) Both a and c
c) Non-integrates d) None of the above
23. Zero-base budgeting overcomes the weaknesses of…………

a) Conventional budgeting b) In-conventional budgeting
c) Both a and b d) None of the above
24. Calendar ratio = ______

a) × 100

b)

× 100
c) Both a and b
d) None of the above
25. Capacity ratio = ______

a)
× 100 b)

: 11 :
26. Efficiency ratio = ______

a) × 100

×
b)

×
c) Both a and b
27. Activity Ratio = __________

a) × 100

b)

× 100
c) Both a and b
28. A master budget is the ……… incorporating its component functional budgets
a) Summary budget b) Winter budget
29. The sales budget is the most important budget and forms the basis on which all the ……….. Built up
a) Other budgets b) Both a and c
c) Spring budgets d) None of the above
30. A system by which budgets are used as a means of planning and controlling all aspects of a
business is called ………..
a) Budgetary control b) Both a and c
c) Budgetary system d) None of the above
31. ……… is a budget designed to finish budgeted costs for any level of activity actually allowed
a) Flexible budget b) Both a and c
c) Fixed budget d) None of the above
32. …….. is a summary of all functional budgets in a capsules form

a) Master budget b) Both a and b
c) Flexible budget d) None of the above
33. Budgetary control helps management to plan and ……

a) Control b) Loss c) Both a and b d) None of the above
34. Budget is an expression of a business plan in financial terms ………..shows the anticipated sources
and utilization of cash.
a) Cash budget b) Both a and c
c) Pass budget d) None of the above
35. ……..determines the priorities of functional budgets

a) Principal budget factor b) Both a and c
c) Production budget factor d) None of the above
36. A document which sets out the responsibilities of the persons engaged in the routine of and the
forms and records required for budgetary control is called …..
a) Budget manual b) Both a and c
c) Principle budget d) None of the above
: 12 :
37. Cash budget is a …....budget
a) Short term budget b) Long term budget
38. ……..is a budget which states the additional workers to be engaged in the factory
a) Labour procurement budget b) Recognizing different budget
39. A budget which consolidates the organisation’s overall plan is called ….

a) Master budget b) Both a and c
c) Profit budget d) None of the above
40. It is essential to determine the proper budget period and to have well defined …….
a) Responsibility centre b) Both a and c
c) Irresponsibility centre d) None of the above
41. Sales budget is a

a) Functional budget b) Master budget
c) Expenditure budget d) None of the above
42. In the case of plant, the limiting factor may be :

a) Insufficient capacity b) Shortage of experienced salesman
c) General shortage of power d) None of the above
43. The difference between fixed and variable cost has a special significance in the preparation of
a) Flexible budget b) Master budget
c) Cash budget d) None of the above
44. The budget that is prepared first of all is

c) Budget for the key factor d) None of the above
45. In case of materials, the key factor may be

a) Insufficient advertising b) Restrictions imposed by quota
c) Low market demand d) None of the above
46. The budget which commonly takes the form of budgeted profit and loss account and balance
sheet is
c) Flexible budget d) None of the above
47. The primary difference between a fixed budget and a variable (flexible) budget is that a fixed
budget :
a) Includes only fixed costs, while a variable budget includes only variable costs
b) Is concerned with only future acquisitions of fixed costs, while a variable budget is
concerned with expenses which vary with sales
c) Cannot be changed after the period begins, while a variable budget can be changed after the
period begins
d) Is a plan for a single level of sales (or other measure of activity), while a variable budget
consists of several plans, one for each of several levels of sales (or other measure of activity)
: 13 :
48. A forecast set of final accounts is also known as ……..
a) Capital budget b) Cash budget
c) Master budget d) Sales budget
49. Budgetary control involves all but one of the following:

a) Modifying future plans
b) Analyzing differences
c) Using static budgets
d) Determining differences between actual and planned results
50. Responsibility centers includes ……

a) Cost centres b) Profit centres
c) Investment centres d) All of the above
51. Which of the following represents the normal sequence in which the below budgets are prepared.
a) Sales, balance sheet, income statement
b) Balance sheet, sales, income statement
c) Sales, income statement, balance sheet
d) Income statement, sales, balance sheet
52. Budgetary control helps the management in …….

a) Planning only b) Control only
c) Planning and control d) Directing
53. A budget that gives a summary of all the functional budgets and projected profit and loss account
is known as …….
a) Capital budget b) Flexible budget
c) Master budget d) Discretionary budget
54. A major element in budgetary control is ……

a) The preparation of long term plans
b) The comparison of actual results with planned objectives
c) The valuation of inventories
d) Approval of the budget by the stock holders
55. A static budget is useful in controlling costs when cost behavior is :

a) Mixed b) Fixed c) Variable d) Linear
56. Which of the following statements most clearly describes the master budget?
a) The master budget is similar to a legal action and must be followed to fulfill company policy
b) The master budget is a strategic plan proposed by management and communicated through
proforma financial statements
c) The master budget is a set of budgeted financial statement that are sometimes called
proforma statements
d) The master budget is not in itself a strategic plan but aids managers in implementing their
strategic plans
57. The budget designed to furnish budgeted cost any level of activity actual attained is called …….
a) Zero base budget b) Fixed budget
c) Flexible budget d) Budget manual
: 14 :
58. Budget reports should be prepared ……
a) Daily b) Monthly c) Weekly d) As frequently as needed
59. A budget is all of the following, except ………………..

(a) A plan which will ensure the generation of future profits
(b) A system which helps to co-ordinate internal activities
(c) A system to integrate the operations for future activity
(d) A financial plan for the future
60. Which of the following is not a function of budgeting?

(a) Decision making (b) Controlling (c) Planning (d) Motivating
61. The term “Budgetary period” relates to …………………………

(a) The period in which the budget is finalized
(b) The period for which of the budget is prepared
(c) The sub-divisions of the main budget
(d) A specific year for which the budget has been prepared
62. A budget is accepted by a manager when they …………………………

(a) Relate it to their own personal objectives (b) Are consulted by top management
(c) Agree to it verbally (d) Receive the budget in writing
63. A fixed budget is ………………………..

(a) A budget that ignores inflation
(b) A budget that is set for a specified level of activity
(c) A budget that never changes
(d) A budget that itemizes the fixed costs of a department
64. A flexible budget is …………………….

(a) A budget that is adjusted to reflect different costs at different activity levels
(b) A budget that will be changed at the end of the month in order to reflect the actual costs of
a department
(c) A budget that comprises variable costs only
(d) A budget that is constantly being changed
65. If actual output is lower than budgeted output, which of the following costs would you expected
to be lower than the original budget?
(a) Total variable cost (b) Total fixed cost
(c) Fixed costs per unit (d) Variable costs per unit
66. Which of the following will NOT appear in a cash budget?

(a) Machinery bought on hire purchase (b) Depreciation of machinery
(c) Sales revenue (d) Wages
67. Which of the following will NOT appear in a cash budget?

(a) Machinery bought on hire purchase (b) Depreciation of machinery
(c) Sales revenue (d) Wages
68. Which of the following would not lead to an increase in net cash flow?
(a) Larger sales volume (b) Reduced materials costs
(c) Higher selling price (d) Lower depreciation charge
: 15 :
69. Which of the following would be found in a cash budget?
(a) Capital expenditure (b) Provision for doubtful debts
(c) Depreciation (d) Accrued expenditure
70. A forecast set of final accounts is also known as …………………………..

(a) Capital budget (b) Cash budget
(c) Master budget (d) Sales budget
71. Which of the following will not affect preparation of cash budget ?
(a) Loan taken by firm (b) Proceeds from asset disposal
(c) Reduction in provision for doubtful debts (d) Cash sales
72. Which of the following budgets should be produced first?

(a) Production budget (b) Purchases budget
(c) Master budget (d) Sales budget
73. Budgetary control involves all but one of the following

(a) Modifying future plans
(b) Analyzing differences
(c) Using static budgets
(d) Determining differences between actual and planned results
74. A static budget is useful in controlling costs when cost behaviour is …………………
(a) Mixed (b) Fixed (c) Variable (d) Linear
75. Responsibility centres include …………………

(a) Cost centres (b) Profit centres
(c) Investment centres (d) All of the above
76. A manager who is responsible for receivables and stock would most likely be considered in charge
of …………………
(a) Profit centre (b) Revenue centre
(c) Cost centre (d) Investment centre
77. Operating budgets are ……………….

(a) A forecast of expected operating expenses
(b) A forecast of operating expenses
(c) Concerned with the income generating activities of the firm
(d) Concerned with the inflows and outflows of cash
78. A statistic budget …………………….

(a) Should not be prepared in a company
(b) Is useful in evaluating a manager’s performance by comparing actual variable costs
(c) Shows planned results at the original budgeted activity level
(d) Is changed only if the actual level of activity is different than originally budgeted
79. Which one of the following would be the same total amount on a flexible budget and a static
budget if the activity level is different for the two types of budgets?
(a) Direct materials cost (b) Direct labour cost
(c) Variable manufacturing overhead (d) Fixed manufacturing overhead
: 16 :
80. Sales budget is a ……………………..
(a) Expenditure budget (b) Functional budget
(c) Master budget (d) None of the above
81. Which of the following is a long-term budget?

(a) Master budget (b) Flexible budget
(c) Cash budget (d) Capital budget
82. Budget are shown in ……………………….terms

(a) Qualitative (b) Quantitative
(c) Materialistic (d) Both (b) and (c)
83. ………………………….. may be defined as, planning and budgeting process which requires each
managers to justify his centre budget request in details from scratch and shift the burden of proof
to each manager to justify why he should spend any money at all
(a) Zero base budgeting (b) Past base budgeting
(c) Master budgeting (d) Performance budgeting
84. …………………………….is a period for which various reports are submitted to take corrective actions by
the management
(a) Control period (b) Budget period
(c) Accounting period (d) All of the above
85. The …………………………. Is concerned with estimating the probable output of each product in the
forthcoming budget period
(a) Production budget (b) Sales budget
(c) Purchase budget (d) Capital expenditure budget
86. …………………… may be defined as analysis and interpretation of the future conditions in relation to
operations of the enterprise
(a) Budgeting (b) Value analysis
(c) Control management (d) Forecasting
87. Budgets are estimate-based on …………………….

(a) Probable events (b) Planned events
(c) Future events (d) All of the above
88. CIMA, London defines …………………………… as, “the establishment of budgets relating the
responsibilities of executives to the requirements of policy, and the continuous comparison of
actual with budgeted results, either to secure, by individual action, the objective of that policy or
to provide a basis for its revision”
(a) Management by exception (b) Budget
(c) Budget reporting (d) Budgetary control
89. Section of an organization for which separate budgets can be prepared, and control exercised is
known as ………………………
(a) Department (b) Budget centre
(c) Budget committee (d) Master budget
: 17 :
90. …………………………… provide a meaningful relationship between estimated inputs and expected
outputs as an integral part of the budgeting system
(a) Zero base budgeting (b) Master budgeting
(c) Performance budgeting (d) Input and output budgeting
Question Answers Question Answers Question Answers

Nos. Nos. Nos.
1 A 31 A 61 B
2 A 32 A 62 A
3 A 33 A 63 B
4 A 34 A 64 A
5 A 35 A 65 A
6 D 36 A 66 B
7 A 37 A 67 B
8 A 38 A 68 C
9 A 39 A 69 A
10 A 40 A 70 C
11 C 41 A 71 C
12 C 42 A 72 D
13 A 43 A 73 C
14 C 44 C 74 B
15 D 45 B 75 D
16 D 46 B 76 D
17 C 47 D 77 C
18 A 48 C 78 C
19 A 49 C 79 D
20 B 50 D 80 B
21 A 51 C 81 D
22 A 52 C 82 D
23 A 53 C 83 A
24 A 54 B 84 A
25 A 55 B 85 A
26 A 56 D 86 D
27 A 57 C 87 B
28 A 58 D 88 D
29 A 59 D 89 B
30 A 60 A 90 C
: 18 :
PRACTICAL MCQs
PRODUCTION AND PURCHASE BUDGET:
Q1. A company has sales in units of 2,600. There are 1,400 units of opening stock while the closing
stock is planned to be 1,800 units. What production is needed to satisfy sales?
(a) 3,000 units (b) 2,437 units (c) 2,600 units (d) 2,200 units
Q2. Consider the following data for the month of May:

Opening stock 120 units
Closing stock 80 units
Sales 150 units
Based on the data, Production in May will have to be?
(a) 110 units (b) 190 units (c) 50 units (d) 150 units

Closing stock 80 units
Production 280 units
Sales 330 units
Based on the data, the opening inventory for May will have to be?
Q4. M Ltd. produces & sells computers. It had 2,000 computers in finished goods inventory at the end
of the last year. M Ltd. expects to sell 20,000 computers and would like to complete in this year
with at least 2,500 completed computers in inventory. There is no ending work-in-progress in
either year. The laptop computers sell for Rs. 15,000 each. How many laptop computers would be
produced for the next year?
(a) 20,000 (b) 20,500 (c) 22,000 (d) 22,500

Opening stock 80 units
Sales 660 units
If the closing inventory has to be 50% higher than the previous month, then production will have
to be?
Q6. As per budget of Z Ltd, estimated sales units for the month of April & May are 12,000 units &
13,000 units. As a matter of policy, the company maintains the closing balance of finished goods as
50% of the estimated sales for the next month. Units to be produced for the month of April = ?
(a) 12,500 (b) 6,000 (c) 18,500 (d) 11,500
Q7. Crown Ltd., has forecast its sales for the next three months as follows:
April : 12,000 units, May : 15,000 units, June : 17,000 units. Opening stock as on 1st April is
expected to be 3500 units. Closing stock should be equal to 20% of the coming month’s sales
needs. The number of units required to be produced in May is :
a) 14600 units b) 11500 units
c) 15400 units d) 13600 units
: 19 :
Q8. A company estimated its sales for the next year quarter wise as under:
Quarter Sales units
I 30,000
II 37,500
III 41,250
IV 45,000
The opening stock of finished goods is 10,000 units and the company expects to maintain the
closing stock of finished goods at 16,250 units at the end of the year. The production pattern in
each quarter is based on 80% of the sales of the current quarter and 20% of the sales of the next
quarter. Closing stock for the last quarter = ?
(a) 16,250 (b) 16,520 (c) 12,500 (d) 12,425
Q9. Budgeted sales of Product-X for March, 2016 are 25,500 units. At the end of production process,
10% of production units are scrapped as defective. Opening stock of Product – X for March is
budgeted to be 15,000 units and closing stock will be 12,000 units. All stock of finished goods must
have successfully passed the quality control check.
The production budget of product – X for March, 2016 is –
a) 25,000 units b) 25,500 units
c) 25,950 units d) 25,250 units
Q10. R Ltd. is budgeting production of 1,00,000 units of product R for the month of May this year.
Production of one unit of product R requires three units of Material B. For Material B, the actual
inventory units at May 1 were 22,000 units and budgeted inventory units at May 31 are 24,000.
How many units of Material B is Company planning to purchase during May?
(a) 3,28,000 (b) 3,02,000 (c) 2,98,000 (d) 2,72,000
Q11. A single product company estimated its units to be produced for the next year quarter wise as
under:
Quarter Production units
I 31,500
II 38,250
III 42,000
IV 48,250
Each unit of finished output requires 2 kg of raw material. The opening stock of raw materials in
the beginning of the year is 10,000 kg and the closing stock at the end of the year is required to be
maintained at 5,000 kg. Raw material to be purchased in kg ?
(a) 3,20,000 (b) 3,25,000 (c) 3,15,000 (d) 3,30,000
Q12. PG Ltd. makes a single product and is preparing its material usage budget for next year. Each unit
of product requires 2 kg of material and 5,000 units of product are to be produced next year.
Opening stock of material is budgeted to be 800 kg and PG Ltd. budgeted to increase material
stock at the end of next year by 20%. The material usage budget for next year is………
(a) 8,000 kg (b) 9,840 kg (c) 10,000 kg (d) 10,160 kg
: 20 :
FLEXIBLE BUDGET
Q13. P Ltd. has prepared its expense budget for 20,000 units in its factory for the year 2016 as detailed
below:
Particulars Per unit
Direct Materials 50
Direct Labour 20
Variable overhead 15
Direct Expenses 6
Selling Expenses (20% fixed) 15
Factory Expenses (100% fixed) 7
Admin Expenses (100% fixed) 4
Distribution expenses (85% variable) 12
Total 129
What will be total cost at 18,000 units.
(a) 20,14,000 (b) 23,53,600 (c) 23,14,000 (d) 25,14,600
Q14. CA Co. manufactures a single product and has drawn up the following flexible budget for the year.
Particulars 60% 70% 80%
Material 1,20,000 1,40,000 1,60,000
Labour 90,000 1,05,000 1,20,000
Factory overheads 54,000 58,000 62,000
Other overheads 40,000 40,000 40,000
Total cost 3,04,000 3,43,000 3,82,000
What would be the total cost in a budget that is prepared at 77% level of activity?
(a) Rs. 3,30,300 (b) Rs. 3,70,300 (c) Rs. 3,73,300 (d) Rs. 3,77,300
Q15. The budget manager of ABC Ltd. is preparing a flexible budget.

Material costs Rs. 7 per unit. Direct labour averages Rs. 2.5 per hour and requires 1.60 hours to
produce one unit. Salesmen are paid commission of Rs. 1 per unit sold.
Production (units) 1,20,000 1,50,000
Production overheads 9,70,000 11,50,000
What will be total cost at 1,40,000 units.
(a) Rs. 26,30,000 (b) Rs. 25,10,000 (c) Rs. 27,70,000 (d) Rs. 28,55,000
Q16. Factory overheads of Good Luck Ltd. at 55% capacity are Rs. 3,10,000 and at 75% capacity
Rs. 3,50,000 for the current year. The following increases in cost are expected in next year:
Variable factory overheads 5%
Fixed Factory overheads 10%
What will be the factory overheads if factory works at 85% capacity next year?
(a) 3,98,500 (b) 2,98,500 (c) 5,98,200 (d) 3,48,250
Q17. If indirect repair cost at 6,000 labour hours is 42,000 and Rs. 63,000 at 7,000 labour hours, then its
indirect repair cost is ………….. in nature.
(a) Variable (b) Fixed (c) Semi-fixed (d) None of the above
: 21 :
Q18. The following information is obtained from the books of account of ABC Ltd.
Months Aug Sept
Units produced 2,800 3,600
Rs. Rs.
Repairs 500 560
Power 1,800 2,000
Shop labour 700 900
Consumables 1,400 1,800
Inspection 200 240
Which cost is semi-variable in nature?
(a) Repair, shop labour & inspection (b) Repair, Power, Consumables & inspection
(c) Shop labour & Consumables (d) Repair, Power & inspection
Q19. Recent budget prepared by G Ltd. shows that inspection cost is Rs. 5,000 at a capacity level of
2,500 units out of which 25% is variable. What will be inspection cost at 1,750 units level of
activity?
(a) Rs. 6,125 (b) Rs. 4,625 (c) Rs. 3,875 (d) Rs. 3,625
Q20. PQR has budgeted the following manufacturing costs:

Fixed manufacturing costs Rs. 25,000 per month, Variable manufacturing costs Rs. 12.00 per unit.
PQR produced 20,000 units during March. How much is the flexible budgeted for total
manufacturing costs for March?
(a) 2,60,000 (b) 3,25,000 (c) 2,40,000 (d) 2,65,000
Q21. A department has budgeted monthly manufacturing overhead cost of Rs. 90,000 plus Rs. 3 per
direct labour hour. If a flexible budget report reflects Rs. 1,74,000 as budgeted manufacturing cost
for the month, the actual level of activity achieved during the month was………
(a) 88,000 direct labour hours (b) 28,000 direct labour hours
(c) 58,000 direct labour hours (d) Cannot be determined
Q22. A job requires 2,400 actual labour hours for completion and it is anticipated that there will be 20%
idle time. If the wage rate is Rs. 10 per hour, what is the budgeted labour cost for the job?
(a) Rs. 19,200 (b) Rs. 24,000 (c) Rs. 28,800 (d) Rs. 30,000
Q23. A job is budgeted to require 3,300 productive hours after incurring 25% idle time. If the total
labour cost budgeted for the job is Rs. 36,300. What is the labour cost per hour?
(a) Rs. 8.25 (b) Rs. 8.80 (c) Rs. 11.00 (d) Rs. 14.67
CASH BUDGET
Q24. BDL Ltd. is currently preparing its cash budget for the year 31st, March 2020. An extract from its
sales budget for the same year shows the following sales values.
Rs.
March 60,000
April 70,000
May 55,000
June 65,000
40% of its sales are expected to be for cash. Of its credit sales, 70% are expected to pay in month
after sale and take a 2% discount. 27% are expected to pay in the second month, 3% are expected
to be bad debts. The value of sales budget to be shown in the cash budget for May………..
(a) Rs. 60,532 (b) Rs. 61,120 (c) Rs. 66,532 (d) Rs. 86,620
: 22 :
Q25. In an organisation, cash sales is 25% and credit sales are 75%. Sales for October, is Rs.12,00,000,
November Rs. 14,00,000, December Rs.16,00,000, January Rs.6,00,000 and February, 2014
Rs. 8,00,000. 60% of credit sales are collected in the next month after sales, 30% in the second
month and 10% in the third month. No bad debts are anticipated.
The cash collected in the month of February, 2020 from debtor is
a) Rs. 15,00,000 b) Rs. 9,80,000
c) Rs. 7,35,000 d) Rs. 80,000
Q26. A Ltd. has observed its receivable collection pattern to be as follows:

40% in the month of the sale, 45% in the month following the sale and 13% in the second month
following the sale.
Sales for the last 3 months of the year were as follows: October Rs. 3,00,000; November, Rs.
4,50,000 and December, Rs. 6,25,000. Sales for January are budgeted to be Rs. 3,75,000. What are
the budgeted cash collections for January?
(a) Rs. 3,75,000 (b) Rs. 4,89,750 (c) Rs. 4,95,750 (d) Rs. 6,25,000
Q27. Kriti Ltd., has provided following information for the quarter January to March :
January February March
Sales @ Rs.20 per unit (units) 1,000 2,000 3,000
Closing debtors (Rs.) 16,000 40,000 64,000
20% of the sales are on cash basis and balance on credit basis. The amount to be collected from
debtors in the month of February and March will be :
a) Zero and Rs.8000 respectively b) Rs.8000 and Rs. 16000 respectively
c) Rs.8000 and Rs.24000 respectively d) Rs.16000 and Rs. 36000 respectively
Q28. A company has made the following budget forecasts for next year:
Particulars Rs.
Opening cash balance 1 January 24,000
Net profit from trading for the year 1,00,000
Payment of tax 25,000
Payment of Dividends 20,000
Purchase of new fixed assets 70,000
Annual depreciation charge 22,000
Particulars 1st January 31st December

Stocks 32,000 35,000
Debtors 41,000 28,000
Creditors 16,000 31,000
st
What is the company’s budgeted cash holding at 31 December next year?
(a) Rs. 34,000 (b) Rs. 26,000 (c) Rs. 6,000 (d) Rs. 56,000

: 23 :
CHAPTER 3 MARGINAL COSTING
THEORY MCQs
1. Absorption costing also called ……………………
(a) Variable costing (b) Total costing
(c) Marginal costing (d) Activity based costing
2. Contribution can be classified as ………………………….

(a) Fixed costs less variable costs
(b) Sales revenue less fixed cost
(c) Selling price less total costs
(d) Selling price less variable costs
3. When deciding to accept a special order at below the normal selling price a firm would consider
which cost?
(a) Absorption cost (b) Marginal cost
(c) Full cost (d) Overhead cost
4. Which of the following is a correct description of absorption costing?

(a) All production costs are absorbed into products and the unsold stock is measured at total cost of
production
(b) Variable costs of products are allocated tow products and the unsold stock is measured at total
variable cost of production
(c) All direct costs of production are absorbed into products and the unsold stock is measured at
direct cost of production
(d) All production costs are absorbed into products and the unsold stock is measured at direct cost
of production
5. Absorption costing is concerned with ……………………….

(a) Variable costs (b) Direct labour
(c) Fixed costs (d) Variable and fixed costs
6. Marginal costing is ………………….

(a) A system of costing (b) A method of costing
(c) A distinct technique of costing (d) None of these
7. The main difference between absorption costing and marginal costing is the treatment of ……
(a) Prime cost (b) Variable overheads
(c) Fixed overheads (d) Direct material and fixed overheads
8. Marginal cost represents …………………

(a) Cost at the margin (b) Variable overheads
(c) Variable cost (d) Contribution
: 24 :
9. Contribution means……………
(a) Profit + Fixed cost (b) Profit + Variable cost
(c) Fixed cost ÷ P/v Ratio (d) All of the above
10. Key factor is also known as …………….

(a) Marginal factor (b) Principal budget factor
(c) Limiting factor (d) All of the above
11. In marginal costing fixed overheads are treated as ……………………………..

(a) Product cost (b) Period cost
(c) Standard cost (d) Abnormal Cost
12. Cost-volume-profit analysis is always based on …………………….

(a) Contribution per unit (b) Profit per unit
(c) Both (a) & (b) (d) None of these
13. Variable costing is also known as ………………….

(a) Direct costing (b) Indirect costing
(c) Marginal costing (d) Both (a) & (c)
14. Using absorption costing, a unit of product includes what costs?

(a) Direct materials and direct labour
(b) Direct materials, direct labour and fixed overhead
(c) Direct materials, direct labour and variable overhead
(d) Direct materials, direct labour, variable overhead and fixed overhead
15. Product Cost under absorption costing is characteristically:

a) Higher than under Variable Costing
b) Lower than under variable Costing
c) Equal to variable costing
d) Higher sometimes and lower sometimes than variable costing
16. When is the breakeven point achieved?

(a) When the level of contribution is equal to total costs
(b) When the total variable costs are equal to total contributions
(c) When the total variable costs are equal to total fixed costs
(d) When the total contribution is equal to total fixed costs
17. A firm has discovered that the cost of a raw material will increase. If nothing else changes what is
the effect of this on margin of safety and breakeven point?
(a) The margin of safety will decrease and the break-even point will increase
(b) The margin of safety will increase and the break-even point will increase
(c) The margin of safety will decrease and the break-even point will decrease
(d) The margin of safety will increase and the break-even point will decrease
18. Production cost under marginal costing includes ……………………….

(a) Prime cost only (b) Prime cost and fixed overhead
(c) Prime cost and variable overhead (d) Prime cost, variable overhead, and fixed overhead
: 25 :
19. Contribution margin is also known as ……………………….
(a) Marginal income (b) Gross profit
(c) Net profit (d) Net loss
20. Contribution margin is equal to …………………..

(a) Fixed cost + Loss (b) Profit + Variable cost
(c) Sales-fixed cost- profit (d) Sales – Profit
21. P/V ratio is an indicator of ………………………..

(a) The rate at which goods are sold (b) The volume of sales
(c) Reduces contribution (d) Increase margin of safety
22. An increase in variable costs......................

(a) Increases PV Ratio
(b) Increases profit
(c) Reduces contribution
(d) Increase margin of safety
23. An increase in selling price …………………….

(a) Increase the break-even point
(b) Decreases the break-even point
(c) Does not the break-even point
(d) Optimize the break-even point
24. A large margin of safety indicates ……………………

(a) Over production (b) Over capitalization
(c) The soundness of the business (d) Under capitalization
25. If fixed costs decrease while variable cost per unit remains constant, the new BEP in relation to the
old BEP will be ………………………..
(a) Lower (b) Higher
(c) Unchanged (d) Indeterminate
26. Absorption costing is also known as ……………………

(a) Historical costing (b) Real costing
(c) Marginal costing (d) Standard costing
27. In marginal costing stock are valued at …………………….

(a) Fixed cost (b) Semi variable cost
(c) Variable cost (d) Market price
28. Marginal costing lays emphasis on ………………………

(a) Production (b) Sales
(c) Marketing (d) Advertising
29. Selling price – Marginal cost = ………………………………..

(a) Fixed cost (b) Semi-variable cost
(c) Contribution (d) Break-even point
: 26 :
30. Total sales – Total variable cost = ………………………….
(a) Fixed cost (b) Semi variable cost
(c) Contribution (d) Standard profit
31. Which of the following cost are not relevant for special decision ?
(a) Avoidable costs (b) Incremental cost
(c) Sunk cost (d) Marginal cost
32. Angle of incidence defines ………………

(a) Systematic risk in CAPM model
(b) Post BEP relationship between total cost and total revenue
(c) Incidental factors in investments
(d) Marginal cost of production
33. In a shutdown decision, one has to consider………….

(a) Contribution
(b) Identifiable fixed cost, If any
(c) Impact of shutdown on other products, If any
(d) All of the above
34. Which of the following is not a relevant cost information in a make or buy decision?
(a) Variable cost of making (b) General fixed cost
(c) Purchase price (d) Loss of contribution to make the product
35. Under marginal costing ……………..

(a) All costs are classified into two groups - Variable and fixed
(b) Variable costs from part of the product cost and inventory valuation
(c) Fixed costs are treated as period costs
36. Which of the following represents a CVP equation?

(a) Sales = Contribution margin (Rs) + Fixed expenses + Profits
(b) Sales = Contribution margin ratio + Fixed expenses + Profits
(c) Sales = Variable expenses + Fixed expenses + Profits
(d) Sales = Variable expenses – Fixed expenses + Profits
37. The difference between total revenues and total variable costs is known as ………………
(a) Contribution margin (b) Gross margin
(c) Operating income (d) Fixed costs
38. The break-even point in units is calculated using …………………….

(a) Fixed expenses and the contribution margin ratio
(b) Variable expenses and the contribution margin ratio
(c) Fixed expenses and the unit contribution margin
(d) Variable expenses and the unit contribution margin
39. The contribution margin ratio is calculated by using which one of the given formula ?
(a) (Sales – Fixed expenses) / Sales (b) (Sales – Variable expenses) / Sales
(c) (Sales – Total expenses) / Sales (d) None of the given option
: 27 :
40. Which of the following is not a technique of costing?
(a) Absorption costing (b) Standard costing
(c) Multiple costing (d) Marginal costing
41. Which of following is not a method of costing?

(a) Marginal costing (b) Job costing
(c) Process costing (d) Operating costing
42. Under absorption costing all …………………… are recovered from production
(a) Fixed cost (b) Variable costs
(c) Fixed and variable cost (d) Fixed, Semi-variable and variable costs
43. Under marginal costing ……………….. are charged to production

(a) Only variable costs (b) Only fixed cost
(c) Only semi variable costs (d) Only standard costs
44. Contribution earned after reaching BEP is ………………………. Of the firm

(a) Profit (b) Margin of safety
(c) (a) & (b) (d) Either (a) or (b)
45. In ‘make or buy’ decision, it is profitable to buy from outside only when the suppliers price is below
the firms own ……………………………
(a) Variable cost (b) Fixed cost
(c) Variable plus fixed cost (d) Identifiable cost
46. Margin of safety is ………………………. Or ………………………….

(a) Sales minus break-even sales, profit/PV ratio
(b) Sales plus break-even sales, profit/PV ratio
(c) Sales minus break-even sales, PV ratio/ profit
(d) Sales ÷ break-even sales, PV ratio/ profit
47. Differential costing and marginal costing mean the same thing
(a) True (b) False
(c) Partly true (d) None of the above
48. Which of the following can improve break-even point?

(a) Increase in variable cost (b) Increase in fixed cost
(c) Increase in sales price (d) Increase in sales volume
: 28 :
Question Nos. Answers Question Nos. Answers

1 B 31 C
2 D 32 B
3 B 33 D
4 A 34 B
5 D 35 D
6 C 36 C
7 C 37 A
8 C 38 C
9 A 39 B
10 C 40 C
11 B 41 A
12 A 42 D
13 D 43 A
14 D 44 A
15 A 45 A
16 D 46 A
17 A 47 B
18 C 48 C
19 A
20 A
21 D
22 C
23 B
24 C
25 B
26 A
27 C
28 B
29 C
30 C
: 29 :
PRACTICAL MCQs
Q.1. Sales Rs. 50,000; Variable cost Rs. 30,000; Net profit Rs. 6,000; Fixed cost is ………….
(a) Rs. 10,000 (b)Rs. 14,000
(c) Rs. 12,000 (d)Rs. 8,000
Q.2. Sales Rs. 25,000; Variable cost Rs. 15,000; Fixed cost Rs. 4,000; P/V ratio is …………
(a) 40% (b) 80% (c) 15% (d) 30%
Q.3. Sales Rs. 25,000; Variable cost Rs. 8,000; Fixed cost Rs. 5,000; Break Even sales in value?
(a) Rs. 7,936 (b) Rs. 7,353 (c) Rs. 8,333 (d) Rs. 9,090
Q.4. Selling price per unit Rs. 10; variable cost Rs. 8 per unit; fixed cost Rs. 20,000; Break even
production in units?
(a) 10,000 (b) 16,300 (c) 2,000 (d) 2,500
Q.5. The following information relates to a product :

Direct materials : 10 kg. @ Rs. 0.50 per kg.
Direct labour : 1 hour 30 minutes @ Rs.4 per hour
Variable overheads : 1 hour 30 minutes @ Rs.1 per hour
Fixed overheads @ Rs.2 per hour (based on a budgeted production volume of 90,000 direct
labour hours for the year)
Selling price per unit : Rs.17
The break-even point is –
a) 40,000 units
b) Rs. 40,000
c) 20,000 units
d) 7200 units
Q.6. A Ltd. has fixed costs of Rs. 60,000 p.a. It manufactures a single product, which it sells for Rs. 20
per unit. P/V Ratio is 40%. A Ltd. break-even point in units is: ……..
(a) 1,800 (b) 3,000 (c) 5,000 (d) 7,500
Q.7. J sells a product for Rs. 6.25. The variable costs are Rs. 3.75. J’s break-even units are 35,000.
What is the amount of fixed costs?
(a) Rs. 87,500 (b) Rs. 35,000 (c) Rs. 1,31,250 (d) Rs. 1,04,750
Q.8. The fixed expenses are Rs.4,000 and break-even point is Rs.10,000. New break-even point, if
selling price is reduced by 20% is _________
a) Rs. 14,000
b) Rs. 15,000
c) Rs. 16,000
d) Rs. 17,000
: 30 :
Q.9. You are requested to report to top management of Eastern India Engineering Company the point
of sales in terms of rupee to break-even. For the purpose, you obtain that:
Fixed overheads remain constant Rs.12,000
Variable costs will rise zero to Rs.12,000
Selling price is Rs.600 per ton
The tonnage produced and sold is 30 tons
a) Rs. 36,000
b) Rs. 32,000
c) Rs. 30,000
d) Rs. 38,000
Q.10. Fixed cost Rs. 80,000; variable cost Rs. 2 per unit; selling price Rs. 10 per unit; Turnover required
for a profit target of Rs. 60,000?
(a) Rs. 1,75,000 (b) Rs. 1,17,400 (c) Rs. 1,57,000 (d) Rs. 1,86,667
Q.11. Mr. Mahesh has a sum of Rs. 3,00,000 which invested in a business. He wishes 15% return on his
fund. It is revealed from the present cost data analysis that variable cost of operation are 60% of
sales and fixed costs are Rs.1,50,000 p.a. On the basis of this information, you are required to find
out the sales volume to earn 15% return.
a) Rs. 4.875 lakh
b) Rs. 4.675 lakh
c) Rs. 4.775 lakh
d) Rs. 5.875 lakh
Q.12. Actual sales Rs. 4,00,000; Break Even Sales Rs. 2,50,000; Margin of safety in percentage is
(a) 66.67% (b) 33.33% (c) 37.5% (d) 76.33%
Q.13. P/V ratio 50%; variable cost of the product Rs. 25; selling price is_____
(a) Rs. 50 (b) Rs. 40 (c) Rs. 30 (d) Rs. 55
Q.14. In a purely competitive market, 10,000 pocket transistors can be manufactured and sold and
certain profit is generated. It is estimated that 2000 pocket transistors need to be manufactured
and sold in a monopoly market to earn the same profit. Profit under both the conditions is
targeted at Rs.2,00,000. The variable cost per transistor is Rs.100 and the total fixed costs are
Rs.37,000. You are required to find out unit selling price per transistor under competitive
condition.
a) Rs. 125.70
b) Rs. 123.70
c) Rs. 128.70
d) Rs. 228.70
Q.15. A retail company sells computer parts; each of which is sold for Rs. 250 and bought from the
manufacturer for Rs. 100. The retailer’s fixed costs are Rs. 1,50,000. Maximum possible sales are
3,000. How many computers must be sold to break-even?
(a) 2,000 (b) 1,000 (c) 750 (d) 3,000
Q.16. Using the information in above question 15, how much profit or loss would be made if 2,700
computers was sold?
(a) Rs. 2,55,000 profit (b) Rs. 1,50,000 loss
(c) Rs. 4,50,000 profit (d) Rs. 1,62,000 profit
: 31 :
Q.17. Using the information above question 15, how many computers would have to be sold for the
company to earn a profit of Rs. 1,80,000?
(a) 1,000 (b) 720 (c) 2,200 (d) 2,000
Q.18. G makes one product which sells for Rs. 80 per unit. Fixed costs are Rs. 28,000 per month and
marginal costs are Rs. 42 a unit. What sales level in units will provide a profit Rs. 10,000?
(a) 1000 units (b) 2,000 units (c) 3000 units (d) 5,000 units
Q.19. Nuksan Ltd. (which makes only one product) sold 10,000 units of its product making a loss of Rs. 10,000.
The variable cost per unit of the product is Rs. 8 and the fixed cost is Rs. 30,000.
The company has estimated its sale demand as under:
Sales units Probability
10,000 0.10
12,000 0.15
14,000 0.20
16,000 0.30
18,000 0.25
(i) What is the probability that the company will continue to make losses.
(ii) What is the probability that the company make a profit of Rs. 6,000.
(iii) What is the probability that the company will make the profit of at least Rs. 2,000.
(iv) What is the probability that the company will make the profit of at the most Rs. 2,000.
Q.20. Fixed cost is Rs. 2,00,000; sales Rs. 8,00,000; P/V ratio 30%; the amount of profit is …….
(a) Rs. 50,000 (b) Rs. 40,000 (c) Rs. 35,000 (d) Rs. 45,000
Q.21. P/V ratio is 25% and margin of safety is Rs. 3,00,000; the amount of profit is ………..
(a) Rs. 1,00,000 (b) Rs. 80,000 (c) Rs. 75,000 (d) Rs. 60,000
Q.22. Profit : Rs. 50,000

Contribution : Rs. 70,000
Sales : Rs. 7,00,000
The amount of margin of safety will be :
a) Rs. 4,00,000
b) Rs. 5,00,000
c) Rs. 2,50,000
d) Rs. 1,45,000
Q.23. A company which has a margin of safety of Rs.4,00,000 makes a profit of Rs.80,000. Its fixed cost
is Rs.5,00,000, its break-even sales will be _____
a) Rs.20 lakh
b) Rs. 30 lakh
c) Rs. 25 lakh
d) Rs. 40 lakh
: 32 :
Q.24. When margin of safety is 20% and P/V ratio is 60%, the profit will be –
a) 30%
b) 33.33%
c) 12%
Q.25. Total sales are Rs. 20,00,000; fixed expenses Rs. 4,00,000; P/V ratio 40%; Break even capacity in
percentage is …..
(a) 40% (b) 60% (c) 50% (d) 45%
Q.26. Break-even point occurs at 40% of total capacity. Margin of safety will be ………
(a) 40% (b) 60% (c) 80% (d) 85%
Q.27. If the P/V ratio of a product is 25% and selling price is Rs. 25 per unit, the marginal cost of the
product would be …………
(a) Rs. 18.75 (b) Rs. 16 (c) Rs. 15 (d) Rs. 20
Q.28. Sun Ltd. sells a product for Rs. 10 per unit. Fixed costs are Rs. 48,000 and the product has a
contribution to sales ratio of 40%.In a period when actual sales were Rs. 1,40,000, Margin of Safety
in units was: ………….
(a) 2,000 (b) 6,000 (c) 8,000 (d) 12,000
Q.29. A firm, which makes yachts, has fixed costs of Rs. 2,60,000 per month. The product sells for Rs.
35,000 per boat, and the variable costs of production are Rs. 15,000 per boat. The boatyard can
manufacture 20 boats each month. What is the firm’s margin of safety at the moment?
(a) 20% (b) 35% (c) 54% (d) 57%
Q.30. Rocky Ltd. shows break even sales Rs. 40,500 and budgeted sales is Rs. 50,000. Identify the
margin of safety ratio?
(a) 19% (b) 81% (c) 1.81% (d) Required more data to calculate
Q.31. A company makes a single product which it sells for Rs. 2 per unit. Fixed costs are Rs. 13,000 per
month. The contribution/ sales ratio is 40%. Sales revenue is Rs. 62,500. What is the margin of
safety (in units)?
(a) 15,000 (b) 16,250 (c) 30,000 (d) 31,250
Q.32. A Company‘s fixed cost amounts to Rs. 120 lakhs p.a. and its overall P/V ratio is 0.4. The annual
sales of the company should be Rs ………….. to have a Margin of Safety of 25%.
(a) 400 lakhs (b) 500 lakhs (c) 450 lakhs (d) 600 lakhs
Q.33. A company with a contribution/sales ratio of 33.33% and fixed cost of Rs. 3 lakhs per month
should have a monthly sales of Rs ……………. Lakhs to maintain a Margin of Safety of 10%
(a) 8 (b) 10 (c) 12 (d) 9
Q.34. A company maintains a Margin of Safety of 25% on its current sales and earns a profit of Rs. 30
lakhs per annum. If the company has a profit volume (P/V) ratio of 40%, its current sales amount to
……………..
(a) Rs. 200 lakhs (b) Rs. 300 lakhs
(c) Rs. 325 lakhs (d) None of the above
: 33 :
Q.35. Horizon Ltd manufactures product BM. Company maintains a Margin of Safety of 37.5% with
contribution to sales ratio of 40%. If the fixed cost is Rs. 5 lakh. The profit of the company is
(a) Rs. 24,00 lakh (b) Rs. 12.50 lakh (c) Rs. 3.00 lakh (d) None of these
Q.36. The ratio of variable cost to sales is 75%. The break-even point occurs at 64% of the capacity
sales when fixed cost is Rs.1,20,000. The 100% capacity sales will be :
a) Rs. 4,80,000
b) Rs. 2,50,000
c) Rs. 7,50,000
Q.37. The following information is given about Zac Ltd., dealing in musical instruments :
P/V ratio 50%
Margin of safety 40%
If the sales volume is Rs.50,00,000 the net profit will be –
a) Rs. 15,00,000
b) Rs. 10,00,000
c) Rs. 20,00,000
d) Rs. 5,00,000
Q.38. Margin of safety is Rs.8000 which represents 40% of sales. P/V ratio is 50%. Fixed cost will be
a) Rs. 6000
b) Rs. 5500
c) Rs. 6500
d) Rs. 7000
Q.39. When margin of safety is 20% and P/v ratio is 60%, the profit will be :
a) 30%
b) 33.33%
c) 12%
d) none of the above
Q.40. A company has annual turnover of Rs. 200 lakhs and an average C/S ratio of 40%. It makes 10%
profit on sales before charging depreciation and interest which amount to Rs. 10 lakhs and Rs. 15
lakhs respectively. The annual fixed cost of the company is …………
(a) Rs. 85 lakhs (b) Rs. 70 lakhs (c) Rs. 60 lakhs (d) Rs. 55 lakhs
Use the following data to answer next 2 questions:

Particulars Rs.
Sales (1,00,000 units) 10,00,000
Variable cost (7,00,000)
Fixed cost (2,10,000)
Operating profit 90,000
Q.41. If fixed costs increased by Rs. 31,500 with no other cost or revenue factors changing, the break
even sales in units would be: ……………..
(a) 34,500 (b) 80,500 (c) 69,000 (d) 94,500
: 34 :
Q.42. If effective income tax rate is 40%, the number of units would have to sell to earn an after-tax
profit of Rs. 90,000 is: …………
(a) 1,00,000 units (b) 1,20,000 units (c) 1,12,000 units (d) 1,45,000 units
Use the following data to answer next 4 questions:

The following data is obtained from the records of an industrial unit:
Sales (4,000 units X Rs. 25) 1,00,000
Material cost 40,000
Variable overheads 10,000
Labour cost 20,000
Fixed overheads 18,000 (88,000)
Net profit 12,000
Q.43. The number of units by selling which the company will neither lose nor gain anything.
Q.44. The sales needed to earn a profit of 20% on sales.

(a) 1,50,000 (b) 1,60,000 (c) 1,70,000 (d) 1,80,000
Q.45. Extra units which should be sold to obtain the present profit if it is proposed to reduce the selling
price by 20%
Q.46. The selling price to be fixed to bring down its break-even point to 500 units under present
conditions.
(a)53.5 (b) 36.0 (c) 35.5 (d) 55.3
Q.47. From the following particulars, calculate the selling price per unit, if the break-even point is
brought down to 10,000 units :
Selling price per unit : Rs.20
Variable cost per unit : Rs. 16
Fixed expenses : Rs. 60,000
Choose the correct option:
a) Rs. 25
b) Rs. 20
c) Rs. 22
d) Rs. 32
Q.48. The cost accountant of M Ltd., has ascertained the selling price of a product is Rs.20 per unit.
Variable cost is Rs.15 per unit and break-even point is 21,600 units. Management has decided to
treat 12,000 units of B.E.P. because production department cannot produce more than this at the
moment. The selling price for 12,000 units B.E.P. will be :
a) Rs 20 per unit
b) Rs 24 per unit
c) Rs 26 per unit
d) Rs 28 per unit
: 35 :
Q.49. Dinesh Ltd. has provided following information:
Sales price : Rs. 20 per unit
Variable cost : Rs. 14 per unit
Fixed overheads : Rs. 7,92,000 p.a.
How many units must be sold to earn 10% on sales?
(a) 1,98,000 units (b) 1,89,000 units (c) 1,88,000 units (d) 1,99,000 units
Q.50. Tom Ltd has sales of Rs. 2,00,000 with variable expenses Rs. 1,50,000, Fixed expenses Rs. 60,000
and an operating loss of Rs. 10,000. How much would Tom Ltd have to increase its sales in order to
achieve an operating income of 10% of sales?
(a) Rs. 4,00,000 (b) Rs. 2,51,000 (c) Rs. 2,31,000 (d) Rs. 2,00,000
Q.51. X Ltd had the following information:

Sales (1,00,000 units) Rs. 2,00,000
Variable costs Rs. 1,00,000
Contribution margin Rs. 1,00,000
Fixed costs Rs. 50,000
Net income Rs. 50,000
If sales were to increase by 200 units, what would be the effect on net income?
(a) Rs. 400 increase (b) Rs. 200 increase (c) Rs. 150 increase (d) Rs. 200 loss
Q.52. In two consecutive periods, sales and profit were Rs. 1,60,000 and Rs. 8,000 respectively in the
first period and Rs. 1,80,000 and Rs. 14,000 respectively during the second period. If there is no
change in fixed costs between the two periods then P/V ratio must be ………
(a) 20% (b) 25% (c) 30% (d) 40%
Q.53. When the sales increase from Rs.40,000 to Rs.60,000 and profit increases by Rs.5,000, the P/V
ratio is _____
a) 20%
b) 30%
c) 25%
d) 40%
Q.54. Z Ltd. recorded sales of Rs. 60 lakhs in 2014 as compared to Rs.45 lakhs in 2013. Profit for 2014
was Rs.5 lakhs higher than that in 2013. If the annual fixed costs amount to Rs.12 lakhs, the
profit on projected sales of Rs.90 lakhs will be ______
a) Rs. 15 lakh
b) Rs. 14 lakh
c) Rs. 12 lakh
d) Rs. 18 lakh
Q.55. A company sells its product at Rs.15 per unit. In a period, if it produces and sells 8,000 units,
incurs a loss of Rs.5 per unit. If the volume is raised to 20,000 units, it earns a profit of Rs.4 per
unit. The break-even point of the company in rupee terms will be ____
a) Rs.1,60,000
b) Rs. 2,00,000
c) Rs. 1,80,000
d) Rs. 2,20,000
: 36 :
Q.56. When the volume is 3000 units, the average cost is Rs.4 per unit. When the volume is 4,000
units, the average cost is Rs.3.50 per unit. The break-even point is 5,000 units. What is the P/V
ratio of the firm _______
a) 35%
b) 37.5%
c) 40%
d) 32.5%
Q.57. A company has annual fixed cost of Rs.1,68,000. In the year 2018-19, sales amounted to
Rs.6,00,000 as compared to Rs.4,50,000 in the preceding year 2017-18. The profit in the year
2018-19 was Rs.42,000 more than that in year 2017-18. The break-even sales of the company is
__________
a) Rs.6,00,000
b) Rs.6,20,000
c) Rs.5,60,000
d) Rs.4,08,000
Q.58. A company sells its product at Rs.15 per unit. In a period, it produces and sells 8,000 units and
incurs a loss of Rs.5 per unit. If the sales volume were to be raised to 20,000 units, it could earn a
profit of Rs.4 per unit. Break-even point (in units) will be
a) 24,000 units
b) 12,000 units
c) 16,000 units
d) 30,000 units
Q.59. If the total cost of producing 20,000 units of a product is Rs.90,000 and if 25,000 units will be
produced, then the total cost will be Rs.1,05,000 and the selling price is Rs.8 per unit. The break-
even point will be :
a) 10,000 units
b) 8,000 units
c) 6,000 units
d) 5,000 units
Q.60. Aman Ltd, sells its products at Rs.16 per unit. In a period, if it produces and sells 20,000 units, it
incurs a loss of Rs.2 per unit. If the volume is doubled, it earns a profit of Rs.2.20 per unit. The
amount of fixed cost and break even point (in units) will be :
a) Rs. 168000 and 26,250 units
b) Rs. 8000 and 53333 units
c) Rs. 1,60,000 and 25,000 units
d) Rs. 1,70,000 units and 42,500 units
Q.61. Hind Corporation has a breakeven point when sales are Rs. 1,60,000 and variable costs at that
level of sales are Rs. 1,00,000. How much would contribution margin increase or decrease, if
variable expenses dropped by Rs. 20,000?
(a) 37.5% (b) 60% (c) 12.5% (d) 26%
: 37 :
Q.62. The variable cost of a product increases by 10% and the management raises the unit selling price
by 10%. The fixed cost remains unchanged. Then BEP (in units) of the firm …………..
(a) Increases (b) Decreases
(c) Remain the same (d) None of the above
Q.63. Manoj Ltd., manufactures three products P,Q and R. the unit selling price of these products are
Rs.100, Rs.160 and Rs.75 respectively. The corresponding unit variable costs are Rs.50 Rs. 80 and
Rs.30. the proportions (quantity – wise) in which these products are manufactured and sold are
20%, 30% and 50% respectively. Total fixed costs are Rs.14,80,000. Overall break even quantity is
____________
a) 26,195 units b) 27,195 units c) 27,165 units d) 28,165 units
Q.64. A manufacturer produces 2,00,000 units of a product at a cost of Rs.3,25 per unit. Later on, he
produces 2,75,000 units at a cost of Rs.3.20 per unit, when its fixed overheads have increased by
10%. Marginal cost per unit and original fixed overheads will be ______
a) Rs.2 and Rs.45,000 respectively
b) Rs.4 and Rs.47,000 respectively
c) Rs.3 and Rs.50,000 respectively
d) Rs.5 and Rs.45,000 respectively
Q.65. There are two similar plants under the same management. The management desires to merge
these two plants. The following particulars are available
Details Plant – I Plant – II
Capacity 100% 60%
(in lakhs) (in lakhs)
Sales 600 240
Variable cost 440 180
Fixed costs 80 40
The capacity of the merged plant to be operated for the purpose of break-even will be
a) 45.14%
b) 48.12%
c) 50.76%
d) 46.16%
Q.66. A plant is operating at 60% capacity. The fixed costs are Rs.30,000, the variable costs are
Rs.1,00,000 and the sales amount to Rs.1,50,000. The percentage of capacity at which the plant
should operate to earn a profit of Rs.40,000 will be :
a) 80%
b) 84%
c) 90%
d) 94%
Q.67. A company producing three products, viz, X, Y and Z has sales mix in the ratio of 2:1:3. The profit
volume ratio of the products X,Y and Z are 15%, 30%, and 20% respectively. The total fixed cost
of the company is Rs.3,50,000. The break-even point of the company will be:
a) Rs. 16,15,390
b) Rs. 17,50,000
c) Rs. 22,33,333
d) Rs. 11,66,667
: 38 :
Q.68. A Company manufactures and sells three types of product namely A,B and C. total sales per
month is Rs.80,000 in which the share of these three products are 50%, 30% and 20% respectively.
Variable cost of these products are 60%, 50% and 40% respectively.
The combined P/V ratio will be :
a) 49%
b) 48%
c) 47%
d) 50%
Q.69. X Ltd. has four product lines A, B, C, D

Particulars A B C D
Sales 10,000 9,000 12,000 31,000
Less: Variable costs (4,500) (7,000) (6,000) (17,500)
Contribution 5,500 2,000 6,000 13,500
Less: Fixed costs (3,500) (6,000) (3,000) (12,500)
Net Profit 2,000 (4,000) 3,000 1,000
Product B appears unprofitable and management is considering discontinuing the line. How would
the discontinuation of Product line B affect net income?
(a) Increase by Rs. 4,000 (b) Decrease by Rs. 4,000
(c) Increase by Rs. 2,000 (d) Decrease by Rs. 2,000

: 39 :
CHAPTER 4 RATIO ANALYSIS
THEORY MCQs
1. Which of the following assets is not a quick current asset for the purpose of calculating acid test
ratio?
a) Short term bills receivables b) Cash
c) Stock d) Debtors less provision for bad and doubtful debts
2. Dividing net sales by average debtors would yield

a) Acid test ratio b) Return on sales ratio
c) Debtors turnover ratio d) Debtors velocity
3. Which of the following liabilities are taken into account for acid test ratio?
1) Trade creditors
2) Bank overdraft
3) Bills payable
4) Outstanding expenses
5) Redeemable debentures.
a) 1,2, 3, 4 and 5 b) 1,3 and 4
c) 1,2, 3 and 4 d) 1,3, 4 and 5
4. ROI - Return on investment is equal to

a) PAT/Tangible Net Worth b) PAT/Net Tangible Assets
c) PAT/Paid up Capital d) Gross Profit/Gross Assets
5. Capital gearing ratio is

a) Market test ratio b) Long-term solvency ratio
c) Liquid ratio d) Turnover ratio
6. ___________is also known as working capital ratio.

a) Current ratio b) Quick ratio
c) Liquid ratio d) Debt-equity ratio
7. What ratio can be used to inefficient buying habits?

a) Inventory turnover ratio b) Gross margin ratio
c) Equity multiplier d) Debt ratio
8. A ratio that compares investors' and creditors' stake in a company is

a) Debt ratio b) Debt equity ratio
c) Equity ratio d) Investor creditor ratio
9. The ratio that explains how efficiently companies use their assets to generate revenue is
a) Revenue asset ratio b) Receivable turnover ratio
c) Income ratio d) Asset turnover ratio
: 40 :
10. What does the accounts receivable turnover ratio tell us?
a) How often account receivable received
b) How many times account receivable is collected
c) Account receivable balance at the end of the period
d) Bad debt balance at the year end
11. The best ratio to evaluate short-term liquidity is:

a) Working capital turnover ratio b) Current ratio
c) Creditors velocity d) All of the above
12. The Du-Pont Analysis uses the following ratios except:

a) Debt ratio b) Profit margin
c) Total asset turnover d) Financial leverage
13. Which best describes the gross margin ratio?

a) Leverage ratio b) Liquidity ratio
c) Coverage ratio d) Profitability ratio
14. Inventory turnover ratio evaluates:

a) Company's ability to move inventory b) Company's inventory purchasing efficiency
c) Both (a) & (b) d) None of the above
15. The quick ratio formula uses which of the following?

a) Total assets b) Cash
c) Total current assets d) Inventory
16. Ratio analysis expresses the relationship of one number to another number. To add meaning to a
ratio it can be compared to
a) Budgeted ratios b) Ratios of prior years or accounting periods
c) Industry averages d) All of the above
17. A company can improve (lower) its debt-to-total assets ratio by doing which of the following?
a) Borrow more b) Shift short-term to long-term debt
c) Shift long-term to short-term debt. d) Sell common stock
18. A firm's equity multiplier is an indication of its position.

a) Liquidity b) Debt
c) Asset utilization d) Inventory
19. Which of the following would NOT improve the current ratio?
a) Borrow short term to finance additional fixed assets.
b) Issue long-term debt to buy inventory
c) Sell common stock to reduce current liabilities
d) Sell fixed assets to reduce accounts payable
: 41 :
20. An examination of the sources and uses of funds statement is part of:
a) A forecasting technique.
b) A funds flow analysis.
c) A ratio analysis
d) Calculations for preparing the balance sheet.
21. Which group of ratios measure a firm's ability to! meet short-term obligations?
a) Liquidity ratios b) Debt ratios
c) Coverage ratios d) Profitability ratios
22. Which group of ratios relate the financial charges of a firm to its ability to service them?
23. Which group of ratios relate profits to sales and investment?

24. In Ratio Analysis, the term Capital Employed refers to:

a) Equity Share Capital b) Net worth
c) Shareholders' Funds d) None of the above
25. Dividend Payout Ratio is:

a) PAT/Capital b) DPS /EPS
c) Pref. Dividend /PAT d) Pref. Dividend / Equity Dividend
26. DU PONT Analysis deals with:

a) Analysis of Current Assets b) Analysis of Profit
c) Capital Budgeting d) Analysis of Fixed Assets
27. In Net Profit Ratio, the denominator is:

a) Net Purchases b) Net Sales
c) Credit Sales d) Cost of goods sold
28. Return on investment may be improved by:

a) Increasing Turnover b) Reducing Expenses
c) Increasing Capital Utilization d) All of the above
29. Which group of ratios shows the extent to which the firm is financed with debt?
30. Debt-Equity Ratio help to study

a) Solvency b) Liquidity
c) Profitability d) Turnover
: 42 :
31. Which of the following is considered a profitability measure?
a) Days sales in inventory b) Fixed asset turnover
c) Price-earnings ratio d) Return on Assets
32. Return on investment is computed as:

a) Net income divided by average total b) Net income divided by average total owners
assets equity
c) Net income divided by total sales d) Sales divided by average total owners' equity
33. Which of the following is not a category of financial statement ratios?

a) Financial leverage b) Liquidity
c) Profitability d) Reliability
34. The dividend payout ratio describes: ....

a) The proportion of earnings paid as dividends
b) The relationship of dividends per share to market price per share
c) The percentage change in dividends this year compared to last year
d) Dividends as a percentage of the price/earnings ratio
35. What type of ratios measure the liquidity of specific assets and the efficiency of managing assets?
a) Profitability Ratios b) Liquidity Ratios
c) Leverage Ratios d) Activity Ratios
36. Which of the following ratios would be useful in assessing short-term liquidity?
a) Current ratio, quick ratio, cash-flow liquidity ratio.
b) Average collection period, debt ratio, return on assets
c) Quick ratio, accounts receivable turnover, return on assets.
d) Current ratio, inventory turnover, fixed asset turnover
37. What does a decreasing inventory turnover ratio usually indicate about a firm?
a) The firm is selling more inventory.
b) The firm is managing its inventory well.
c) The firm is inefficient in the management of inventory.
d) Both (a) and (b)
38. Company J and Company K each recently reported the same EPS. Company J's stock, however,
trades at a higher price. Which of the following statements is most correct?
a) Company J must have a higher P/E ratio.
b) Company J must have a higher market to book ratio.
c) Company J must be riskier.
d) All of the statements above are correct.
39. Activity ratios are measured with the help of

a) Fixed assets b) Sales
c) Profit d) Expenses
: 43 :
40. Which of the following is not activity ratio?
a) Sales to inventory b) Net profit to sales
c) Sales to debtors d) Assets turnover
41. Debt equity ratio is

a) Profitability ratio b) Solvency Ratio
c) Activity Ratio d) Operating Ratio
42. In capital gearing ratio numerator is

a) Variable income securities b) Fixed income securities
c) Both (a) & (b) d) Either (a) or (b)
43. Issue of shares at cash will ____________ current ratio.

a) Reduce b) Improve
c) Not change d) Can't say
44. Purchase of stock for cash will _____________ current ratio.

a) Reduce b) Improve
c) Not change d) Can't say
45. Which of the following is market test ratio?

a) Basic Defence Interval b) Debt Service Coverage
c) Dividend Yield Ratio d) All of the above
46. Proprietary Ratio assess

a) Long Term Solvency b) Short Term Solvency
c) Profitability d) Activity
47. Proprietary Funds =

a) Equity Share Capital + Reserves - Fictitious Assets + Current Assets
b) Equity Share Capital + Preference Share Capital + Fixed Assets - Fictitious Assets
c) Equity Share Capital + Preference Share Capital + Reserves - Fictitious Assets
48. All of the above are correct
Interest cover is also known as
a) Debt Equity Ratio b) Debt Service Ratio
c) Debt Ratio d) Interest to debt ratio
49. While calculating dividend cover for preference shares numerator should be taken as
a) EBIT b) Profit available for equity shareholder
c) PAT d) PAT + Depreciation
50. _______________ ratios are used to measure how effectively the firm employs its resources.
a) Turnover b) Profitability
c) Market test d) Short term solvency
51. The _____________ reflects the market's confidence in the company's equity.
a) P/E ratio b) Net profit ratio
c) Cash profit ratio d) Total assets turnover ratio
: 44 :
52. ____________ is a good measure of the dividend policy of the company.
a) Dividend Payout Ratio b) Price Earnings Ratio
c) Earnings Per Share d) None of the above
53. Explain the important ratio that would be used in following situation:
A bank is approached by a company for a loan of ` 50 lakh for working capital purposes.
a) Capital Structure/Leverage Ratios b) Profitability Ratios

c) Liquidity Ratios d) Activity Ratios
Question Nos. Answers Question Nos. Answers

1 C 30 A
2 C 31 D
3 B 32 A
4 B 33 D
5 B 34 A
6 A 35 D
7 A 36 A
8 B 37 C
9 D 38 A
10 B 39 B
11 B 40 B
12 A 41 B
13 D 42 B
14 C 43 B
15 B 44 C
16 D 45 C
17 D 46 A
18 C 47 C
19 A 48 B
20 B 49 C
21 A 50 A
22 C 51 A
23 D 52 A
24 D 53 C
25 B
26 B
27 B
28 D
29 B
: 45 :
PRACTICAL MCQs
Q.1. When the current ratio is 2 : 5, and the amount of current liabilities is Rs. 25,000, what is the
amount of current assets?
(a) 3 (b) Rs. 12,500 (c) Rs. 10,000 (d) None of these
Q.2. When quick ratio is 1.5 : 1 and the amount of quick assets Rs. 30,000, what is the amount of quick
liabilities?
(a) Rs. 20,000 (b) Rs. 50,000 (c) Rs. 45,000 (d) Rs. 30,000
Q.3. Balance Sheet of a company indicates that its current ratio is 1.5. Company’s net working capital is
Rs. One crore. The current Assets would amount to ………….
(a) Rs. 3 crore (b) Rs. 1.5 crore (c) Rs. 4 crore (d) Rs. 2.5 crore
Q.4. S Ltd. gives the following information:

Net working capital Rs. 2,80,000
Current ratio 2.4
Liquid ratio 1.6
Current Assets = ?
(a) 2,00,000 (b) 2,80,000 (c) 4,80,000 (d) 3,60,000
Q.5. Current assets of Z Ltd. are Rs. 3,70,000 which includes stock Rs. 1,00,000 and prepaid expense Rs.
70,000. Its current liability are Rs. 1,60,000 which includes provision for tax Rs. 60,000. Liquid Ratio
=?
(a) 1.25 (b) 1.52 (c) 1.22 (d) 0.95
Q.6. N Ltd. gives the following information:

Current Ratio 2.8
Total assets Rs. 60,00,000
Fixed assets Rs. 32,00,000
Current liabilities = ?
(a) 28,00,000 (b) 10,00,000 (c) 18,00,000 (d) 12,00,000
Q.7. A Ltd. financial statement shows the following data:
Equity Rs. 5,67,500, Reserves & surplus Rs. 3,87,850, total debt, Rs. 5,88,778 out of which Rs.
2,88,778 are long term debt, fixed assets are Rs. 11,44,128.
Current Ratio = ?
(a) 2.48 (b) 1.92 (c) 3.68 (d) 1.33
Liquid Ratio 1.6
Current Assets Rs. 28,00,000
Current Liabilities Rs. 10,00,000
Stock = ?
(a) 28,00,000 (b) 10,00,000 (c) 18,00,000 (d) 12,00,000
: 46 :
Q.9. S Ltd. gives the following information:
Current Ratio = 2.4
Quick Ratio = 1.0
Stock = Rs. 5,60,000
Current Assets = ?
(a) 9,60,000 (b) 6,90,000 (c) 4,00,000 (d) 4,60,000
Q.10. If a firm has Rs. 100 in inventories, a current ratio equal to 1.2 and a quick ratio equal to 1.1, what
is the firm’s Net Working Capital?
(a) Rs. 10 (b) Rs. 100 (c) Rs. 200 (d) Rs. 1,200
Q.11. G Ltd. has total current liabilities of Rs. 2,000 and an inventory of Rs. 1,000. If its current ratio is
2.5. then what is its quick ratio?
(a) 2.0 (b) 2.5 (c) 3.0 (d) 3.5
Q.12. Given the following information:

Particulars Rs.
Cash 29,000
Accounts Receivable 1,14,000
Inventory 1,13,000
Prepaid Expenses 6,000
Total capital assets 5,25,000
Total current liabilities 1,42,000
Long-term debt 2,89,000
Total shareholders’ equity 3,56,000
Net sales 8,58,000
Cost of goods sold 5,13,000
Gross Margin 3,45,000
Net income 48,000
The acid test ratio = ?
(a) 75% (b) 1.85 times (c) 1.01 times (d) 55%
Q.13. From the information given below calculate the amount of fixed assets.
Fixed assets to proprietors fund = 0.75
Net Working Capital = Rs. 6,00,000
(a) 17,50,000 (b) 18,00,000 (c) 17,00,000 (d) 18,50,000
Q.14. Proprietary Ratio = 0.6

[Fixed Assets/Proprietary Fund]
Current Assets = Rs. 2,00,000
Current Liabilities = Rs. 80,000
Fixed Assets = ?
(a) 3,00,000 (b) 1,60,000 (c) 1,80,000 (d) 2,40,000
: 47 :
Q.15. When opening stock is Rs. Rs. 50,000, closing stock Rs. 60,000, and cost of goods sold Rs. 2,20,000,
the stock turnover ratio is ………..
(a) 2 times (b) 3 times (c) 4 times (d) 5 times
Q.16. Opening Stock Rs. 29,000; Purchases Rs. 2,42,000; Sales Rs. 3,20,000; Gross Profit 25% of sales.
Stock Turnover Ratio will be: …………
(a) 8 times (b) 6 times (c) 9 times (d) 10 times
Q.17. Given the following information:

Particulars Rs.
Cash 29,000
Accounts Receivable 1,14,000
Inventory 1,13,000
Prepaid Expenses 6,000
Total capital assets 5,25,000
Total current liabilities 1,42,000
Long-term debt 2,89,000
Total shareholders’ equity 3,56,000
Net sales 8,58,000
Cost of goods sold 5,13,000
Gross Margin 3,45,000
Net income 48,000
Inventory turnover ratio = ?
(a) 8.62 (b) 5.56 (c) 7.52 (d) 4.54
Q.18. A Ltd. financial statements show the following data:

Opening stock Rs. 1,75,000, Total purchase Rs. 10,75,000 including cash purchase Rs. 1,75,000,
total sales Rs. 15,00,000 out of which 20% are on cash basis. Closing stock is Rs. 1,50,000. Stock
turnover ratio = ?
(a) 7.67 (b) 6.77 (c) 7.76 (d) 7.66
Q.19. Gross profit ratio = 20%, Stock velocity = 6 months

Gross profit for the year ended amounts to Rs. 5,00,000. Stock of the year is Rs. 20,000 more than
what it was at the beginning of the year. Closing stock = ?
(a) 10,00,000 (b) 9,90,000 (c) 10,10,000 (d) 10,20,000
Q.20. Total sales of OLX Ltd. are Rs. 31,248 out of which 25% are cash sales. Closing balance of debtors
are Rs. 9,468. Debtors velocity = ?
(a) 4.2 months (b) 157 days (c) 148 days (d) 4.43 months
Q.21. If credit sales for the year is Rs. 5,40,000 and Debtors at the end of year is Rs. 90,000 the average
Collection Period will be?
(a) 30 days (b) 61 days (c) 90 days (d) 120 days
: 48 :
Q.22. When net sales for the year are Rs. 2,50,000 and debtors Rs. 50,000, the average collection period
is: …………
(a) 60 days (b) 45 days (c) 42 days (d) 73 days
(e)
Q.23. K Ltd. had sales last year of Rs. 26,50,000, including cash sales of Rs. 2,50,000. If its average
collection period was 36 days, its ending accounts receivable balance is closest to …. (Assume a
365 day year)
(a) 2,40,000 (b) 2,36,712 (c) 2,63,127 (d) 2,40,721
Q.24. Debtors velocity = 3 months

Sales = 25,00,000
Bills receivable & Bills payable were Rs. 60,000 and Rs. 36,667 respectively.
Sundry debtors = ?
(a) 6,25,000 (b) 5,25,000 (c) 5,65,000 (d) 6,65,000
Q.25. KT Ltd. opening stock was Rs. 2,50,000 and closing stock was 3,75,000. Sales during the year was
Rs. 13,00,000 and gross profit ratio was Rs. 25% on sales. Average account payable are Rs. 80,000.
Creditors Turnover Ratio = ?
(a) 13.44 (b) 14.33 (c) 13.33 (d) 14.44
Q.26. Creditors velocity = 2 months.

Cost of goods sold = Rs. 20,00,000
Opening stock = Rs. 9,90,000
Closing Stock = Rs. 10,10,000
Bills receivable & Bills payable were Rs. 60,000 and Rs. 36,667 respectively.
Creditors = ?
(a) 3,36,667 (b) 3,66,333 (c) 3,30,367 (d) 3,00,000

Fixed assets = Rs. 10,50,000
Fixed assets turnover ratio (on cost of sales) = 2
GP rate on sales = 25%
Sales = ?
(a) 21,00,000 (b) 25,00,000 (c) 26,00,000 (d) 28,00,000
Q.28. SZ Ltd. gives the following information:

Fixed Assets = 10,50,000
Current Assets = 9,60,000
Current Liabilities = 4,00,000
Debenture = 4,00,000
Reserve to capital = 0.21
Reserve = ?
(a) 10,00,000 (b) 12,10,000 (c) 2,10,000 (d) 1,10,000
: 49 :
Q.29. Capital gearing ratio = 0.625
Long term debts = Rs. 5,00,000
Reserve to capital = 0.6
Reserve = ?
(a) 8,00,000 (b) 5,00,000 (c) 3,00,000 (d) 4,00,000
Q.30. Given the following information, calculate the company’s long-term debt.
Current assets: Rs. 1,25,000
Current liabilities: Rs. 85,000
Net fixed assets: Rs. 2,50,000
Total equity: Rs. 2,00,000
(a) Rs. 3,75,000 (b) Rs. 50,000 (c) Rs. 2,85,000 (d) Rs. 90,000
Q.31. Given net profit Rs. 150,000, preference dividend Rs. 25,000, taxes Rs. 10,000 and number of
equity shares 1,00,000. What is the Earning per Share (EPS)?
(a) Rs. 1.50 (b) Rs. 1.25 (c) Rs. 1.15 (d) None of these
Q.32. KJ Ltd. PAT is Rs. 1,06,000. Its equity share capital is Rs. 3,50,000 of Rs. 10 each. The market price
is Rs. 45.
P/E Ratio = ?
(a) 12.87 (b) 15.84 (c) 14.85 (d) 150
Q.33. EBIT of NS Ltd. is Rs. 2,99,000

12% Long term loan Rs. 1,00,000
14% Debentures Rs. 2,50,000.
Interest Cover = ?
(a) 6.33 (b) 3.36 (c) 3.66 (d) 6.36
Q.34. Earnings after Interest and Tax is Rs. 20 crore, interest is Rs. 4 crore, Income Tax is Rs. 16 crore.
Interest Coverage Ratio would be …………
(a) 10.00 (b) 9.00 (c) 7.50 (d) 5.00
Q.35. When net profit is Rs. 2,25,000, taxes Rs. 25,000 and net worth Rs. 10,00,000 what is the rate of
return on shareholders’ equity?
(a) 22.5% (b) 20% (c) 25% (d) Cannot be calculated
Q.36. Profit after tax of GB Ltd. was Rs. 3,40,000. Total assets are Rs. 5,94,70,000 out of which
3,57,00,000 was finance from loan funds.
Return on equity = ?
(a) 1.34% (b) 0.57% (c) 1.43% (d) 1.57%
: 50 :
Q.37. Company’s EBIT is Rs. 2,99,000 which includes miscellaneous income Rs. 9,000. Its capital
employed is Rs. 11,00,000. ROI = ?
(a) 27.18% (b) 26.36% (c) 26.18% (d) 27.36%
Q.38. Accounting information given by a company

Total assets turnover 3 times
Net profit margin 10%
Total assets Rs. 1,00,000
The net profit is: ………
(a) Rs. 10,000 (b) Rs. 15,000 (c) Rs. 25,000 (d) Rs. 30,000
Q.39. Determine a firm’s total asset turnover if its net profit margin is 5%, total assets is Rs. 80,00,000
and ROI is 8%
(a) 1.60 (b) 2.05 (c) 2.50 (d) 4.00
Q.40. X Ltd. has on 8% return on total assets of Rs. 3,00,000 and a net profit margin of 5%. What are its
sales?
(a) Rs. 37,50,000 (b) Rs. 4,80,000 (c) Rs. 3,00,000 (d) Rs. 15,00,000
Q.41. K Ltd. has debt-to-total assets 0.4. What is its debt-to-equity ratio?
(a) 0.2 (b) 0.6 (c) 0.667 (d) 0.333

: 51 :
CHAPTER 5 VALUE OF SHARES / GOODWILL
1. Given : the growth rate in the dividends is expected to be 8%. The Beta of the stock is 1.60
and the return on the market index is 13%.
The required rate of return would be :
a) 14% b) 16% c) 18% d) 20%
2. Identify which of the following is not a financial liability?

a) X Ltd. has 1 lakh Rs.10 ordinary shares issued
b) X Ltd. has 1 lakh 8% Rs.10 redeemable preference shares issued
c) X Ltd. has Rs. 2,00,000 of 6% bond issued
d) Both (A) and (B)
3. If a company has a PE ratio of 12 and a Market to Book Value Ratio 2.10, then its Return
on Equity will be
(a) 14.10% (b) 17.50% (c) 25.20% (d) None of the above
4. VARTUAL LTD. acquired 1000 shares in ANKIT LTD. at a Cum-right price of Rs.250 per
share. Ankit Ltd. offered right shares of one for every two held at 125 per share. After the
right issue the share price fell from Rs.250 to Rs.200 per share. If the rights were sold by
vartual Ltd. at Rs.70 per share, what would be the carrying cost of investment in Ankit Ltd.
After the sale of rights ?
(a) Rs.2,50,000 (b) Rs.2,15,000 (c) Rs. 2,85,000 (d) None of (A), (B) and (c).
5. Mr. BIKRAM purchased 1000 shares in Ranjan Laboratories at Rs.300 per share in 2005.
There was Rights issue in 2008 at one share for every two held at a price of Rs. 100 per
share. If Mr. Bikram subscribed to the rights, what would be carrying cost of Rs.1500
shares.
a) Rs.2,50,000 b) Rs.3,50,000
c) Rs.3,00,000 d) Insufficient information.
6. ANKITA LTD. has a Plant, (Asset) which is carried in the Balance Sheet on 31-03.2009 at
Rs.500 lakh. As at that date the value in use is Rs.400 lakh. What would be the
impairment loss of the Plant, if the net selling price as on 31.03.2009 is 300 lakh?
(a) Rs. 100 lakh (b) Rs. 125 lakh
(c) Rs. 150 lakh (d) Incomplete information.
7. The share capital of Sanjana Ltd. is Rs.10,00,000 consisting of fully paid 10,000 shares,
15% preference shares of Rs.100 each and 9,000 equity shares of Rs.100 each. The
after-tax profit of the company for the year 2008-09 is the normal rate of return is 8%. The
value of equity share of the company is
a) Rs. 171 b) Rs. 125 c) Rs. 154 d) Rs. 150
: 52 :
8. SUHASI LTD. issued 20,000 shares of Rs.10 each at a discount of 10%. Mr. Harish to
whom 500 shares were allotted failed to pay the final call of Rs.3 and hence, his shares
were forfeited. The amount to be transferred to the credit of shares forfeiture account is
(a) Rs. 1,500 (b) Rs. 3,500 (c) Rs. 3,000 (d) Rs. 4,500.
9. GAYATHRI LTD. purchased 1000 shares in SAVITHA LTD. at Rs. 600 per share in 2008.
There was a rights issue in 2009 at one shares for every two held at a price of Rs.150 per
share. If GAYATHRI LTD. subscribed to the rights what would be the carrying cost of 1500
shares?
a) Rs. 6,75,000 b) Rs. 6,50,000
c) Rs. 6,00,000 d) Insufficient information
10. ANURAG LTD. purchased a Plant on 1.4.2008 for Rs.10,00,000. It provides depreciation
@ 20% on W.D.V. during the year ended on 31.3.2010. What would be the carrying
amount of Plant on 31.03.2010, if the company provided impairment loss on Plant for
Rs.1,00,000?
a) Rs.5,40,000 b) Rs.6,40,000
c) Rs.7,40,000 d) insufficient information
11. Super Profit is Rs. 9,167 and the Normal Rate of Return is 10%. Goodwill as per
capitalisation of Super Profit method is equal to
(a) Rs. 91,670 (b) Rs. 90,600 (c) Rs. 67,910 (d) Rs. 95,000
12. The following data is extracted from the 'books of HYDER LTD. as on March 31, 2010.
Paid up value of an Equity Share : Rs.10
Nominal value of an Equity Share : Rs.20
The Yield rate of return of the company: 15.75%.
If the normal rate of return is 9%, what would be value of an Equity Share of HYDER LTD.
(a) Rs.20.00 (b) Rs.17.50 (c) Rs.15.75 (d) None of the above.
13. In case of amalgamation in the nature of purchase, Fixed Assets; Current Assets; Total
Debts; Debit balance of profit and Loss A/c and Purchase Consideration are Rs.25,60,000;
Rs.12,50,000; Rs.11,30,000; Rs.2,20,000; and Rs.24,00,000 respectively. The amount of
Capital Reserve of Goodwill will be
(a) Goodwill Rs. 60,000 (b) Goodwill Rs.2,80,000
(c) Capital Reserve Rs.60,000 (d) Capital Reserve Rs.1,60,000
14. Chandra Ltd. acquired a machine for Rs.65 Lakhs on 1st July, 2014. It has a life of 5 years
with a salvage value of Rs.7 Lakhs. As on 31st March, 2017, if present value of future cash
flows is Rs. 28 Lakhs and net selling price is Rs. 25 Lakhs, impairment loss will be
(a) Rs. 3 Lakhs (b) Rs. 30 Lakhs
(c) Rs. 18.15 Lakhs (d) Rs. 5.10 Lakhs
: 53 :
15. Roshan Ltd. agreed to absorb Richa Ltd. For this purpose Richa Ltd's 5000, 9%
Preference shares are valued at Rs. 124.50 each and Rs. 65,000 Equity shares are valued
at Rs. 32 each. If Roshan Ltd. discharged purchase consideration by issuing its Equity
shares of Rs. 10 each which is having intrinsic value of Rs.46 each. No. of Equity shares
issued by Roshan Ltd. to Richa Ltd. will be
(a) 45,214 (b) 2,70,250 (c) 58,750 (d) 70,000
16. X Ltd. holds 69% of. Y Ltd., Y Ltd. holds 51 % of W Ltd., Z Ltd. holds 49% Of W Ltd. As
per AS 18 related parties are:
(a) X Ltd., Y Ltd. & W Ltd. (b) X Ltd. & Z Ltd.
(c) Y Ltd. & Z Ltd. (d) X Ltd. & Y Ltd.
17. Kovid Ltd. agreed to absorbs Shiva Ltd. Shiva Ltd. has been issued 120000 Equity Shares
of Rs.10 which having intrinsic value of Rs.32 each. If intrinsic value of Kovid Ltd.'s equity
share is Rs.64 each, then how many Equity shares should be issued by Kovid Ltd. to
Shiva Ltd. to meet out the purchase consideration?
(a) 2,40,000 (b) 1,20,000 (c) 18,750 (d) 60,000
18. Capital Employed is Rs.255 Lakhs; Annual average profits are Rs.57 Lakhs; Normal rate
of return is 12%. The value of goodwill on the basis of Capitalization of super profits will be
(a) Rs. 220 Lakhs (b) Rs. 475 Lakhs
(c) Rs. 6.84 Lakhs (d) Rs. 26.40 Lakhs
19. A firm values goodwill under 'Capitalisation of Profits' method. Average profit of the firm for
past 4 years has been determined at Rs.1,00,000 (before tax). Capital employed in the
business is Rs.4,80,000 and its normal rate of return is 12%. Tax rate is 28% on average.
Value of Goodwill based on capitalisation of average profit will be:
a) Rs.1,20,000 b) Rs.6,00,000
c) Rs.5,00,000 d) Rs.4,80,000
20. Biomed International Ltd. is developing a new production process. During the financial
year ending 31 March, 2017, the total expenditure incurred was Rs.50 lakhs. This process
met the criteria for recognition as an intangible asset on 1st December, 2016. Expenditure
incurred till this date was Rs.22 lakhs. Further expenditure incurred on the process for the
financial year ending 31 March, 2018 was Rs.80 lakhs. As at 31 March, 2018, the
recoverable amount of knowhow embodied in the process is estimated to be 72 lakhs. This
includes estimates of future cash outflows as well as inflows. The amount of impairment
loss for the year ended 31st March, 2018 is
(a) Rs.80 lakhs (b) Rs.36 lakhs
(c) Rs.28 lakhs (d) Rs.72 lakhs
21. Goodwill is a:
(a) Intangible asset (b) Fixed asset
(c) Current asset (d) Fictitious asset
: 54 :
22. The most popular method of valuation of goodwill in case of death of a partner is
(a) Purchase of past Profit Method (b) Capitalisation Method
(c) Purchase of supper Profit Method (d) Annuity Method.
23. A business is having adjusted net profits of Rs.1,00,000 and capital employed
Rs.6,00,000. If goodwill is taken at 3 years purchase of super profits and the expected rate
of return is 10% the value of goodwill win be:
a) Rs. 60,000 b) Rs.1,20,000
c) Rs.3,00,000 d) Rs.5,00,000
24. The methods of valuation of shares-are:

a) 3 b) 4 c) 5 d) 6
25. Intrinsic value of share can be determined by:

(a) Fair value Method (b) Yield value Method
(c) Net Assets Method (d) Through SEBI
26. In comparison to face value, the valuation of shares are usually:

(a) More (b) Less (c) Equal (d) Less and more
27. Valuation of shares is compulsory

(a) On amalgamation (b) On absorption
(c) On reconstruction (d) On all the above
28. In view of investor, the most appropriate method of valuation of share is:
(a) Net Assets Method (b) Yield Value Method
(c) Both (A) and (B) (d) None of these
29. Intrinsic value of shares is determined

(a) On the basis of net Assets (b) On the basis of income
(c) On the basis of market price (d) By speculators
30. For calculating net assets the deductible liability is

(a) General Reserve (b) Loan
(c) Preference Capital (d) Equity Capital
31. On dividend net assets by number of shares, the value of share is called:
(a) Intrinsic value (b) Book value
(c) Cost price (d) Market price
32. Goodwill isLL

(a) An intangible asset (b) A fixed asset
(c) realisable (d) All of the above
: 55 :
33. Goodwill is to be valued whenL..
(a) Amalgamation takes place (b) One company takes over another company
(c) A partner is admitted (d) All of the above
34. Goodwill is paid for obtainingL..

(a) Future benefit (b) Present benefit
(c) Past benefit (c) None of the above
35. Super profit isLL..

(a) Excess of average profit over normal profit (b) Extra profit earned
(c) Average profit earned by similar companies (d) None of the above
35. Normal profit isLL.

(a) Average profit earned
(b) Profit earned by similar companies in the same industry
(c) (a) and (b)
(d) None of the above
36. Normal profit depends onLLL

(a) Normal Rate of Return (b) Average capital employed
(c) Both (a) and (b) (d) None of the above
37. Normal profit depends on LL..

a) Normal rate of return b) Average capital employed
38. Goodwill as per purchase of average profit method is equal toLL..

(a) Average Profit
(b) Average profit × Amount of purchases
(c) Average Profit × Number of years' purchases
39. Goodwill as per purchase or super profit method is equal toLLL

(a) Super Profit
(b) Super Profit × Amount of purchases
(c) Super Profit × Number of year's purchases
40. Normal Rate of Return depends onLLLLL..

(a) Rate of Interest (b) Rate of Risk
(c) Both (a) and (b) (d) None of the above
: 56 :
41. While calculating capital employedLLL
(a) Tangible trading assets should be considered
(b) Intangible assets should be considered
(c) Fictitious assets should be considered
42. Any non-trading income included in the profit should beLLL..

(a) Eliminated (b) Added (c) Ignored (d) None of the above
43. Under capitalization of super profit method, Goodwill is equal toLLL

(a) Capitalised value of super profit at NRR
(b) Capitalised value of maintained profit
(c) (a) and (b)
44. Capital employed at the end of the year is Rs. 4,20,000. Profit earned Rs. 40,000.
Average capital employed isLLLL
a) Rs. 4,20,000 b) Rs. 4,00,000
c) Rs. 4,40,000 d) Rs. 4,60,000
45. Rate of interest is 11% and the rate of risk is 90/0. The normal rate of return isL..
(a) 11% (b) 9% (c) 20% (d) 2%
46. Capital employed at the beginning of the year is Rs. 5,20,000 and the profit earned during
the year is 60,000. Average capital employed during the year isLL
a) Rs. 5,50,000 b) Rs. 5,20,000
c) Rs. 5,80,000 d) Rs. 4,60,000
47. Average profit is Rs. 19,167 and normal profit is Rs.10,000. The Super Profit isLLL..
(a) Rs. 9,167 (b) Rs. 29,167
(c) Rs. 19,167 (d) Rs. 10,000
48. Capital employed is Rs.50,000. Trading Profit amounted to Rs.12,200, Rs.15,000 and
Rs.2,000 loss for 2008, 2009 and 2010 respectively. Rate of interest is 8% and the rate of
risk is 2%. Remuneration from alternative employment of the proprietor is Rs.3,600 p.a.
Amount of Goodwill at 3 years' purchase of Super Profit isLL..
a) Rs. 8000 b) Rs. 8800 c) Rs. 8850 d) Rs. 9500
49. Shares are to be valued onLLL

(a) Mergers (b) Sale of shares
(c) Gift tax (d) All of the above
: 57 :
50. Quoted shares are those shares which areLLL.
(a) Listed on the stock exchange (b) Quoted daily
(c) Quoted by the seller (d) Quoted by the buyer
51. Under net asset method, value of a share depends onLLLL

(a) Net assets available to equity shareholders
(b) Net assets available to debentures holders
(c) Net assets available to preference shareholders
52. Net asset value is also called asLLL

(a) Assets backing value (b) Intrinsic value
(c) Liquidation value (d) (a), (b) and (c)
53. While deciding net asset value, fictitious assetsLLL.

(a) Should be considered (b) Should not be considered
(c) Added to total assets (d) None of the above
54. Net asset value method is based on the assumption that the company is LLL.
a) A going concern b) going to be liquidated
c) A and b d) None of the above
55. Yield value depends onLL

(a) Future maintainable profit (b) Paid-up equity capital
(c) Normal rate of return (d) None of the above
56. F.M.P. for yield valuation isLL..

(a) Future profit (b) Profit that would be available to equity shareholders
(c) Past profit (d) None of the above
57. Yield value is based on the assumption thatLL..

(a) The company is going concern (b) The company will be liquidated
(c) The company is sick (d) None of the above
58. Fair value of a share is equal toLL.

(a) Intrinsic value only (b) Yield value only
(c) Average of intrinsic and yield value (d) None of the above
59. Value of a partly paid equal share is equal toLLL

(a) Value of fully paid share- calls unpaid per share (b) Calls in arrears per share
(c) Paid -up value per share (d) None of the above
: 58 :
60. Following details are extracted from the records of a company :
Rs.
2000 9% Preference Shares of Rs.100 each 2,00,000
50,000 Equity shares of Rs.10 each, Rs.8 per share paid up 4,00,000
Expected Profit 2,18,000
Tax Rate 40%
Transfer to general reserve 20%
Normal rate of earning 15%
Yield value per share is LL..
a) Rs. 15 b) Rs. 11.55 c) Rs. 16 d) Rs. 17.50
61. Gross assets are Rs.1,01,000, fictitious assets Rs. 350 are included in the gross assets.
External liabilities are Rs. 7,500, 6% preference share capital is Rs.45,000, equity capital
is 4500 equity shares of Rs.10 each fully paid. Average expected profit is Rs. 8500.
Transfer to reserves is 10% preference dividend is payable. NRR is 9%. The net asset
value per share is LLL..
a) Rs. 11 b) Rs. 10.70 c) Rs. 15 d) Rs. 20
62. The company earns a net profit of Rs.24,000 with a capital of Rs.1,20,000. The NRR is
10%. Under capitalization of super profit, goodwill will be LLL.
a) Rs.1,20,000 b) Rs.70,000 c) Rs.12,000 d) Rs.24,000
63. Average capital employed Rs.14,00,000

Net profit 2,50,000
2012 1,00,000 (loss)
2013 4,50,000
NRR 10%
Goodwill at 3 year’s purchase of super profit will be LLL..
a) 1,80,000 b) 1,50,000 c) 1,20,000 d) 90,000
64.
Equity share of Rs. 10 each Rs.22,00,000
15% preference shares of Rs.100 each Rs.18,00,000
Rs.40,00,000
Average net profit 10,50,000
NRR 20%
Net tangible assets are revalued by Rs. 2,00,000 more than the amounts at which they are
stated in the books. Super profit of the company will be LLL.
a) Rs. 2,00,000 b) Rs. 2,10,000
c) Rs. 2,50,000 d) Rs. 2,70,000
: 59 :

Paper 5 - Corporate & MGMT Acs MCQs Part 1 PDF

Загружено:

Сведения о документе

Оригинальное название

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Paper 5 - Corporate & MGMT Acs MCQs Part 1 PDF

Загружено:

Авторское право:

Доступные форматы

CS EXECUTIVE –

1. COST SHEET 1–9

5. VALUE OF SHARES / GOODWILL 52 – 59

CHAPTER 1 COST SHEET

Q.1. A Statement which shows break-up and buildup of cost

Q. 2. Sum total of direct cost is called as

Q. 3. Following are the uses of

Q. 5. Sum total of prime cost and factory overheads

Q. 6. Sum total of factory cost and office and administrative overheads

Q.8. Cost - Loss = ?

Q10. Closing stock of Raw material is valued at

Q.14. The term "prime cost" refers to

Q15. Prime cost is

Q16. Which of the following is not a component of prime cost?

Q17. Overheads consist of all the following except

Q18. Recruitment costs

Q22. Direct materials + Direct labour + Direct expenses =

Q24. Prime cost + Factory overhead + Administration overhead

Q25. Total cost - Selling and distribution overheads =

Q26. Cost of production - Administration overheads =__

Q27. Prime cost + Overheads =______

Q28. Total cost + Profit = ____

Q29. The total variable cost _____ in total proportion to output

Q30. Variable cost per unit ________

Q32. Fixe cost per unit _________with increase in output

Q33. Administration expenses are mostly____________

Q34. Cost of production is equal to___________

Q35. Variable cost increases with _____________ in output

Q38. Works cost is a total of ___________________

Q39. Depreciation is _____ expenditure

Q40. Expenses are excluded from cost

Q42. _________ Expenses are partly fixed and partly variable

Q43. Unsuccessful research expenditure should be _____ cost accounts

Q44. Salary paid to general manager is an item of _____ expenses.

Q.45. Fancy packing is an example of ______ expenses

Q.46. Telephone expense is ______ expense

Q47. Primary packing is an item of ________

Q48. Credit and collection cost is an item of

Q49. Warehousing cost is an item of

Q51. Fixed cost per unit decreases when:

Q52. Prime cost + Factory overhead cost is

Q53. Factory overheads includes,

Q54. Added cost of new product will be,

Q55. Packing cost is a __________

Q57. Which of the following are direct expenses?

Q5. From the following particulars, calculate Direct material consumed

Q6. From the following details calculate Prime Cost.

Q9. Raw materials consumed Rs. 80,000

Q13. Calculate cost of sales from the following:

Q15. Calculate value of closing stock from the following:

CHAPTER 2 BUDGETARY CONTROL

4. ……….. budget is most suited for fixed expenses

5. …………budget shows he anticipated sources and utilization of cash.

7. Zero base budgeting was first used by ……………

8. Master budget incorporates all ……budgets

9. A factor which influences all other budgets, is called …….factor

10. Budgetary control is a system of controlling ……..

12. Which of the following is usually a long term budget?

16. Cash budget is prepared because it :

19. While preparing cash budget, operating balance of cash is added to :

20. Cash budget is based on …….

21. Budgeting may be said to be the act of ….. budgets

22. Budgeting system _______key managerial functions